Control of cell differentiation occurs through transcriptional mechanisms and through epigenetic modification. Using a chromatin immunoprecipitation-on-chip approach, we performed a genome-wide search for target genes of peroxisome proliferator-activated receptor gamma (PPAR gamma) and its partner protein retinoid X receptor alpha during adipogenesis. We show that these two receptors target several genes that encode histone lysine methyltransferase SET domain proteins. The histone H4 Lys 20 (H4K20) monomethyltransferase PR-Set7/Setd8 gene is upregulated by PPAR gamma during adipogenesis, and the knockdown of PR-Set7/Setd8 suppressed adipogenesis. Intriguingly, monomethylated H4K20 (H4K20me1) levels are robustly increased toward the end of differentiation. PR-Set7/Setd8 positively regulates the expression of PPAR gamma and its targets through H4K20 monomethylation. Furthermore, the activation of PPAR gamma transcriptional activity leads to the induction of H4K20me1 modification of PPAR gamma and its targets and thereby promotes adipogenesis. We also show that PPAR gamma targets PPAR gamma2 and promotes its gene expression through H4K20 monomethylation. Our results connect transcriptional regulation and epigenetic chromatin modulation through H4K20 monomethylation during adipogenesis through a feedback loop.