It has been hypothesized that activation of peroxisome-proliferator-activated receptor-gamma (PPARgamma) by thiazolidinedione drugs can increase adipogenesis at the expense of osteogenesis, leading to bone loss. However, the reported skeletal effects of these compounds are varied and their effects on cortical bone are unknown. In this study, we examined the changes in both cancellous and cortical bone of 6-month-old male mice treated with darglitazone, a potent and selective PPARgamma agonist, at 10 mg/kg/day by dosing the compound in a food mixture for 2 or 8 weeks. At 2 weeks, we observed significantly increased marrow adipose tissue area, decreased trabecular bone density of distal femur, and decreased surface referent bone formation rate of lumbar vertebrae in the mice treated with darglitazone compared with controls. At 8 weeks, lower cancellous bone mass was seen at both distal femurs and lumbar vertebrae of the mice treated with darglitazone. In addition, mineralizing surface was significantly lower, whereas osteoclast surface and number were significantly higher in the lumbar vertebrae of darglitazone-treated mice. At the femoral diaphysis, darglitazone treatment caused bone loss on the endocortical surface. Interestingly, periosteal mineral apposition rate and surface referent bone formation rate were significantly increased in darglitazone-treated mice. In bone marrow cell cultures, darglitazone suppressed alkaline phosphatase activity, osteoblastic gene expression, and mineralized nodule formation while increasing adipogenic gene expression and lipid accumulation. In summary, darglitazone enhanced adipogenesis and caused cancellous bone loss by increasing bone resorption and decreasing bone formation in mice. In addition, darglitazone induced cortical bone loss on the endocortical surface but increased bone formation on the periosteal surface. These data suggest that PPARgamma plays a role in regulating bone resorption and formation and reveal surface-specific effects of a PPARgamma agonist on bone.