The past several years have seen an explosive increase in our understanding of the transcriptional basis of adipose cell differentiation. In particular, a key role has been illustrated for PPAR-gamma, a member of the nuclear hormone receptor superfamily. PPAR-gamma has also been recently identified as the major functional receptor for the thiazolidinedione class of insulin-sensitizing drugs. This review examines the evidence that has implicated this transcription factor in the processes of adipogenesis and systemic insulin action. In addition, several models are discussed that may explain how a single protein can be involved in these related but distinct physiological actions. I also point out several important areas where our knowledge is incomplete and more research is needed. Finally, I discuss how advances in our understanding of nuclear receptor function, particularly the docking of cofactors in a ligand-dependent fashion, should lead to improved drugs that utilize the PPAR-gamma system for the treatment of insulin resistance.