The incidence of Diabetes Mellitus (DM) has increased to alarming levels not only in developed countries but also in developing and underdeveloped countries. Scientific data have made it clear by now that patients with DM are predisposed to many other diseases. One of the worst associations of DM is with obesity and the number of DM patients with obesity is increasing at a very fast pace due to dramatic change in life style around the world in last few decades. This necessitates the discovery of new drugs to treat increasing numbers of people with both DM and obesity. Peroxisome Proliferator activated receptor gamma (PPARγ) is a well known target for DM and thiazolidiniones (TZDs; a common class of antidiabetic drug) which includes rosiglitazone and pioglitazone act through PPARγ. Recent studies have demonstrated that PPARγ apart from being important in glucose utilization also plays a critical role in lipid metabolism and energy homeostasis affecting long-term metabolic status. The possibility of selective modulation of PPARγ has opened up a whole new avenue of research and has the potential of producing some drug which can simultaneously fight both DM and obesity, without the side-effects of the currently available PPARγ modulators. Here, we discuss various aspects of selective modulation of PPARγ action.