Chondrocytes and adipocytes are two differentiated cell types which are both derived from mesenchymal cells. The purpose of this study was to investigate whether peroxisome proliferator-activated receptor-gamma (PPARgamma), a transcription factor involved in lineage determination during adipogenesis, is able to induce adipogenic differentiation in growth plate chondrocytes. Isolated epiphyseal chondrocytes were infected with a PPARgamma adenovirus or treated with the PPARgamma agonist ciglitazone. Both of these treatments resulted in lipid droplet accumulation and expression of the adipogenic markers aP2, lipoprotein lipase, and adipsin in chondrocytes. Proteoglycan matrix synthesis was decreased in the PPARgamma-infected cells, as was the expression of the chondrogenic genes Col2a1 and aggrecan. Growth plate cells transfected with a PPARgamma expression plasmid under the control of the collagen alpha1(II) promoter also demonstrated a similar adipogenic changes. Terminal differentiation of growth plate chondrocytes induced by thyroid hormone was also inhibited by overexpression of PPARgamma and ciglitazone treatment, with decreased expression of alkaline phosphatase and Runx2/Cbfa1 genes. These in vitro data suggest that PPARgamma is able to promote adipogenic differentiation in growth plate chondrocytes, while negatively regulating chondrogenic differentiation and terminal differentiation.