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Peroxisome proliferator-activated receptor gamma (PPAR gamma) is a nuclear receptor, which controls adipocyte differentiation. We targeted with homologous recombination the PPAR gamma 2-specific exon B, resulting in a white adipose tissue knockdown of PPAR gamma. Although homozygous (PPAR gamma hyp/hyp) mice are born with similar weight as the WT mice, the PPAR gamma hyp/hyp animals become growth retarded and develop severe lipodystrophy and hyperlipidemia. Almost half of these PPAR gamma hyp/hyp mice die before adulthood, whereas the surviving PPAR gamma hyp/hyp animals overcome the growth retardation, yet remain lipodystrophic. In contrast to most lipodystrophic models, the adult PPAR gamma hyp/hyp mice only have mild glucose intolerance and do not have a fatty liver. These metabolic consequences of the lipodystrophy are relatively benign because of the induction of a compensatory gene expression program in the muscle that enables efficient oxidation of excess lipids. The PPAR gamma hyp/hyp mice unequivocally demonstrate that PPAR gamma is the master regulator of adipogenesis in vivo and establish that lipid and glucose homeostasis can be relatively well maintained in the absence of white adipose tissue.