The peroxisome proliferator-activated receptor gamma (PPARgamma) is a prototypical member of the nuclear receptor superfamily and integrates the control of energy, lipid, and glucose homeostasis. PPARgamma can bind a variety of small lipophilic compounds derived from metabolism and nutrition. These ligands, in turn, determine cofactor recruitment to PPARgamma, regulating the transcription of genes in a variety of metabolic pathways. PPARgamma is the main target of the thiazolidinedione class of insulin-sensitizing drugs, which are currently a mainstay of therapy for type 2 diabetes. However, this therapy has a number of side effects. Here, we review the clinical consequences of PPARgamma polymorphisms in humans, as well as several studies in mice using general or tissue-specific knockout techniques. We also discuss the recent pharmacological literature describing a variety of new PPARgamma partial agonists and antagonists, as well as pan-PPAR agonists. The results of these studies have added to the understanding of PPARgamma function, allowing us to hypothesize a general mechanism of PPARgamma action and speculate on future trends in the use of PPARgamma as a target in the treatment of type II diabetes.