Peroxisome proliferator-activated receptor-gamma (PPAR-gamma) has essential roles in adipogenesis and glucose homeostasis, and is a molecular target of insulin-sensitizing drugs. Although the ability of PPAR-gamma agonists to antagonize inflammatory responses by transrepression of nuclear factor kappa B (NF-kappaB) target genes is linked to antidiabetic and antiatherogenic actions, the mechanisms remain poorly understood. Here we report the identification of a molecular pathway by which PPAR-gamma represses the transcriptional activation of inflammatory response genes in mouse macrophages. The initial step of this pathway involves ligand-dependent SUMOylation of the PPAR-gamma ligand-binding domain, which targets PPAR-gamma to nuclear receptor corepressor (NCoR)-histone deacetylase-3 (HDAC3) complexes on inflammatory gene promoters. This in turn prevents recruitment of the ubiquitylation/19S proteosome machinery that normally mediates the signal-dependent removal of corepressor complexes required for gene activation. As a result, NCoR complexes are not cleared from the promoter and target genes are maintained in a repressed state. This mechanism provides an explanation for how an agonist-bound nuclear receptor can be converted from an activator of transcription to a promoter-specific repressor of NF-kappaB target genes that regulate immunity and homeostasis.