Peroxisome proliferator-activated receptor gamma (PPARgamma) acts as a ligand-dependent transcription factor with a key role in mediating adipocyte differentiation and insulin sensitivity. Recently, we and others have shown that PPARgamma recruits the nuclear corepressors NCoR and silencing mediator for retinoid and thyroid hormone receptors (SMRT) to modulate adipogenesis. While the synthetic ligands for PPARgamma, the thiazolidinediones (TZD), are widely used in the treatment of type 2 diabetes mellitus, the biologically relevant endogenous PPARgamma ligand involved in adipogenesis remains unidentified. To further understand the role of ligand binding and corepressor interaction in PPARgamma-mediated adipogenesis, a mutation was introduced in the ligand-binding domain (LBD) of murine PPARgamma. PPARgammamut was created via two amino acid substitutions known to be major determinants of ligand selectivity among PPAR isotypes, H323Y and R288M. These mutations alter PPARgamma to the corresponding residues of the PPARalpha. Characterizing the in vitro functional properties of this mutant, we show that PPARgammamut preferentially responds to the PPARalpha agonist, WY-14643, over the TZD, pioglitazone. When expressed in 3T3-L1 preadipocytes using recombinant adenovirus, wild-type PPARgamma leads to adipocyte formation with both hormonal and TZD treatment. PPARgammamut blocks the upregulation of adipocyte-specific proteins by TZD, but surprisingly, not by standard hormonal inducers. Our data suggest that TZDs and the purported endogenous ligand do not interact in the same way with the PPARgamma LBD. We propose that the endogenous ligand has distinct properties that allow for promiscuity within the hydrophobic PPAR ligand-binding pocket, yet fosters appropriate cofactor recruitment and release to allow adipogenesis to proceed.