Peroxisome proliferator-activated receptor γ (PPARγ) is a nuclear receptor that mediates the antidiabetic effects of thiazolidinediones. PPARγ is present in adipose tissue and becomes elevated in fatty livers, but the roles of specific tissues in thiazolidinedione actions are unclear. We studied the function of liver PPARγ in both lipoatrophic A-ZIP/F-1 (AZIP) and wild type mice. In AZIP mice, ablation of liver PPARγ reduced the hepatic steatosis but worsened the hyperlipidemia, triglyceride clearance, and muscle insulin resistance. Inactivation of AZIP liver PPARγ also abolished the hypoglycemic and hypolipidemic effects of rosiglitazone, demonstrating that, in the absence of adipose tissue, the liver is a primary and major site of thiazolidinedione action. In contrast, rosiglitazone remained effective in non-lipoatrophic mice lacking liver PPARγ, suggesting that adipose tissue is the major site of thiazolidinedione action in typical mice with adipose tissue. Interestingly, mice without liver PPARγ, but with adipose tissue, developed relative fat intolerance, increased adiposity, hyperlipidemia, and insulin resistance. Thus, liver PPARγ regulates triglyceride homeostasis, contributing to hepatic steatosis, but protecting other tissues from triglyceride accumulation and insulin resistance.