Peroxisome proliferator-activated receptors (PPARs) are nuclear hormone receptors, initially described as molecular targets for synthetic compounds that induce peroxisome proliferation. PPARgamma is the best characterized of the PPARs. The heterodimer of PPARgamma with the retinoid X receptor (RXR) plays a crucial role in adipogenesis and insulin sensitization. The RXR/PPARgamma heterodimer furthermore has been reported to have important immunomodulatory activities and to affect cell proliferation/differentiation pathways in various malignancies. PPARgamma is activated by a number of naturally occurring fatty acid derivatives and by several synthetic compounds, including the thiazolidinediones and L-tyrosine-based insulin sensitizers. This review gives an overview of the pleiotropic functions of PPARgamma and discusses the wide-ranging medical implications that modulation of PPARgamma activity might have for various diseases, ranging from obesity and type 2 diabetes to cancer and inflammation.