Fatty acid binding protein 4 (FABP4, also known as aP2) is a cytoplasmic fatty acid chaperone expressed primarily in adipocytes and myeloid cells and implicated in the development of insulin resistance and atherosclerosis. Here we demonstrate that FABP4 triggers the ubiquitination and subsequent proteasomal degradation of peroxisome proliferator-activated receptor γ (PPARγ), a master regulator of adipogenesis and insulin responsiveness. Importantly, FABP4-null mouse preadipocytes as well as macrophages exhibited increased expression of PPARγ, and complementation of FABP4 in the macrophages reversed the increase in FABP4 expression. The FABP4-null preadipocytes exhibited a remarkably enhanced adipogenesis compared with wild-type cells, indicating that FABP4 regulates adipogenesis by downregulating PPARγ. We found that the FABP4 level was higher and PPARγ level was lower in human visceral fat and mouse epididymal fat compared with their subcutaneous fat. Furthermore, FABP4 was higher in the adipose tissues of obese diabetic individuals compared with healthy ones. Suppression of PPARγ by FABP4 in visceral fat may explain the reported role of FABP4 in the development of obesity-related morbidities, including insulin resistance, diabetes, and atherosclerosis.