Thiazolidinedione derivatives are antidiabetic agents that increase the insulin sensitivity of target tissues in animal models of non-insulin-dependent diabetes mellitus. In vitro, thiazolidinediones promote adipocyte differentiation of preadipocyte and mesenchymal stem cell lines; however, the molecular basis for this adipogenic effect has remained unclear. Here, we report that thiazolidinediones are potent and selective activators of peroxisome proliferator-activated receptor gamma (PPAR gamma), a member of the nuclear receptor superfamily recently shown to function in adipogenesis. The most potent of these agents, BRL49653, binds to PPAR gamma with a Kd of approximately 40 nM. Treatment of pluripotent C3H10T1/2 stem cells with BRL49653 results in efficient differentiation to adipocytes. These data are the first demonstration of a high affinity PPAR ligand and provide strong evidence that PPAR gamma is a molecular target for the adipogenic effects of thiazolidinediones. Furthermore, these data raise the intriguing possibility that PPAR gamma is a target for the therapeutic actions of this class of compounds.