Systemic lupus erythematosus (SLE) is an inflammatory autoimmune disease for which current therapy is suboptimal. SLE is characterized by autoantibody production, with renal disease and premature atherosclerosis being common and severe manifestations causing appreciable morbidity and mortality. Peroxisome proliferator-activated receptor gamma (PPARgamma) agonists are widely used in the treatment of diabetes mellitus for their insulin-sensitizing properties, but also have immunomodulatory effects. In this report, we show that the PPARgamma agonist rosiglitazone reduces autoantibody production, renal disease, and atherosclerosis in mouse models of SLE. The beneficial effect of rosiglitazone on SLE manifestations depends on the induction of adiponectin, because rosiglitazone has no effect on autoantibody production or renal disease in lupus mice that lack adiponectin. In addition, lupus mice that lack adiponectin develop more severe disease than adiponectin-sufficient lupus mice, indicating that endogenous adiponectin is involved in regulating disease activity. Furthermore, administration of exogenous adiponectin ameliorates disease. These experiments suggest that PPARgamma agonists may be useful agents for the treatment of SLE. They also demonstrate that induction of adiponectin is a major mechanism underlying the immunomodulatory effects of PPARgamma agonists.