The peroxisome proliferator-activated receptor-gamma (PPARgamma) is a transcription factor that has a pivotal role in adipocyte differentiation and expression of adipocyte-specific genes. The PPARgamma1 and gamma2 isoforms result from alternative splicing and have ligand-dependent and -independent activation domains. PPARgamma2 has an additional 28 amino acids at its amino terminus that renders its ligand-independent activation domain 5-10-fold more effective than that of PPARgamma1. Insulin stimulates the ligand-independent activation of PPARgamma1 and gamma2 (ref. 5), however, obesity and nutritional factors only influence the expression of PPARgamma2 in human adipocytes. Here, we report that a relatively common Pro12Ala substitution in PPARgamma2 is associated with lower body mass index (BMI; P=0.027; 0.015) and improved insulin sensitivity among middle-aged and elderly Finns. A significant odds ratio (4.35, P=0.028) for the association of the Pro/Pro genotype with type 2 diabetes was observed among Japanese Americans. The PPARgamma2 Ala allele showed decreased binding affinity to the cognate promoter element and reduced ability to transactivate responsive promoters. These findings suggest that the PPARgamma2 Pro12Ala variant may contribute to the observed variability in BMI and insulin sensitivity in the general population.