Peroxisome proliferator-activated receptor (PPAR) gamma is a nuclear receptor that is a key regulator of adipogenesis and is present in two isoforms generated by alternative splicing, PPARgamma1 and PPARgamma2. Studies of the ability of each isoform to stimulate fat differentiation have yielded ambiguous results, in part because PPARgamma stimulates its own expression. We have thus undertaken a formal genetic analysis using PPARgamma-null fibroblast cell lines to assess the specific role of each individual isoform in adipogenesis. We show here that both PPARgamma1 and PPARgamma2 have the intrinsic ability to stimulate robust adipogenesis. Adipose cells stimulated by either PPARgamma1 or PPARgamma2 express a similar gene profile and show similar responses to insulin. However, in response to low ligand concentrations, PPARgamma2 shows a quantitatively greater ability to induce adipogenesis. Analyses involving coactivator binding and transcriptional assays indicate that PPARgamma2 has an enhanced ability to bind components of the DRIP/TRAP complex, coactivators required for fat differentiation.