Peroxisome proliferator-activated receptor γ (PPARγ) activation induces adipogenesis and also enhances lipogenesis, mitochondrial activity, and insulin sensitivity in adipocytes. Whereas some studies implicate PPARγ coactivator 1α (PGC-1α) in the mitochondrial effect, the mechanisms involved in PPARγ regulation of adipocyte mitochondrial function are not resolved. PPARγ-activating ligands (thiazolidinediones (TZDs)) are important insulin sensitizers and were recently shown to indirectly induce PGC-1β transcription in osteoclasts. Here, we asked whether similar effects occur in adipocytes and show that TZDs also strongly induce PGC-1β in cultured 3T3-L1 cells. This effect, however, differs from the indirect effect proposed for bone and is rapid and direct and involves PPARγ interactions with an intronic PPARγ response element cluster in the PGC-1β locus. TZD treatment of cultured adipocytes results in up-regulation of mitochondrial marker genes, and increased mitochondrial activity and use of short interfering RNA confirms that these effects require PGC-1β. PGC-1β did not participate in PPARγ effects on adipogenesis or lipogenesis, and PGC-1β knockdown did not alter insulin-responsive glucose uptake into 3T3-L1 cells. Similar effects on PGC-1β and mitochondrial gene expression are seen in vivo; fractionation of obese mouse adipose tissue reveals that PPARγ and PGC-1β, but not PGC-1α, are coordinately up-regulated in adipocytes relative to preadipocytes and that TZD treatment induces PGC-1β and mitochondrial marker genes in adipose tissue of obese mice. We propose that PPARγ directly induces PGC-1β expression in adipocytes and that this effect regulates adipocyte mitochondrial activity.