The thiazolidedione (TZD) class of drugs is clinically approved for the treatment of type 2 diabetes. The therapeutic actions of TZDs are mediated via activation of peroxisome proliferator-activated receptor γ (PPARγ). Despite their widespread use, concern exists regarding the safety of currently used TZDs. This has prompted the development of selective PPARγ modulators (SPPARMs), compounds that promote glucose homeostasis but with reduced side effects due to partial PPARγ agonism. However, this also results in partial agonism with respect to PPARγ target genes promoting glucose homeostasis. Using a gene expression-based screening approach we identified N-acetylfarnesylcysteine (AFC) as both a full and partial agonist depending on the PPARγ target gene (differential SPPARM). AFC activated PPARγ as effectively as rosiglitazone with regard to Adrp, Angptl4, and AdipoQ, but was a partial agonist of aP2, a PPARγ target gene associated with increased adiposity. Induction of adipogenesis by AFC was also attenuated compared with rosiglitazone. Reporter, ligand binding assays, and dynamic modeling demonstrate that AFC binds and activates PPARγ in a unique manner compared with other PPARγ ligands. Importantly, treatment of mice with AFC improved glucose tolerance similar to rosiglitazone, but AFC did not promote weight gain to the same extent. Finally, AFC had effects on adipose tissue remodeling similar to those of rosiglitazone and had enhanced antiinflammatory effects. In conclusion, we describe a new approach for the identification of differential SPPARMs and have identified AFC as a novel class of PPARγ ligand with both full and partial agonist activity in vitro and in vivo.