PPARγ is required for fat cell development and is the molecular target of antidiabetic thiazolidinediones (TZDs), which exert insulin-sensitizing effects in adipose tissue, skeletal muscle, and liver. Unexpectedly, we found that inactivation of PPARγ in macrophages results in the development of significant glucose intolerance plus skeletal muscle and hepatic insulin resistance in lean mice fed a normal diet. This phenotype was associated with increased expression of inflammatory markers and impaired insulin signaling in adipose tissue, muscle, and liver. PPARγ-deficient macrophages secreted elevated levels of factors that impair insulin responsiveness in muscle cells in a manner that was enhanced by exposure to FFAs. Consistent with this, the relative degree of insulin resistance became more severe in mice lacking macrophage PPARγ following high-fat feeding, and these mice were only partially responsive to TZD treatment. These findings reveal an essential role of PPARγ in macrophages for the maintenance of whole-body insulin action and in mediating the antidiabetic actions of TZDs.