Understanding adipocyte differentiation and function is crucial to the treatment of obesity and diabetes. The nuclear receptor PPARgamma is required for these processes. While many known ligands for PPARgamma exist, including the thiazolidinedione (TZD) class of antidiabetic drugs, the identity of the actual endogenous ligand(s) is not known. We have developed a feedback-inducible reporter system for the detection and monitoring of PPARgamma ligand activity. A potent, PPARgamma-activating ligand activity was found in the conditioned medium of differentiating adipocytes. This ligand activity will be isolated, characterized, and identified by chemical extraction, high-performance liquid chromatography, and mass spectrometry. Specificity of the ligand for PPARgamma will be characterized. The physiological regulation and metabolism of the ligand will be investigated, including determining the roles of candidate transcriptional activators of ligand production. This work will be the foundation for a research program investigating the role of natural PPARgamma ligands in health and disease.