Peroxisome proliferator activated receptors (PPARs) are DNA-binding nuclear hormone receptors that are upregulated in response to high fat diets. PPARs are structurally related to the type II nuclear receptors, including the thyroid hormone receptors (TRs). To investigate if PPARs modulate TR-mediated terminal differentiation of growth plate chondrocytes, primary cultures of epiphyseal chondrocytes transiently transfected with TRalpha and PPARgamma expression vectors were treated with the PPAR ligands ciglitazone or troglitazone. Forced overexpression of PPARgamma decreased TRalpha1-mediated transcriptional activity and suppressed T3-induced increases in alkaline phosphatase activity and type X collagen expression. Similar effects were observed when the cells were treated with the PPARgamma activator ciglitazone or troglitazone. Overexpression of retinoid X receptor-alpha (RXRalpha) partially restored not only the inhibition of transcriptional activation by PPARgamma but also T3-induced hypertrophic differentiation. These data demonstrate that activation of PPARgamma signaling by either addition of PPARgamma ligands or overexpression of PPARgamma in growth plate chondrocytes inhibits TR-mediated gene transcription and inhibits the biological effects of thyroid hormone on terminal differentiation. The molecular mechanism involved in this inhibition appears to be competition between PPARgamma and TRalpha for limiting amounts of the heterodimeric partner RXR.