Thiazolidinediones (TZDs) are potent insulin sensitizers that act through the nuclear receptor peroxisome proliferator-activated receptor-gamma (PPAR gamma) and are highly effective oral medications for type 2 diabetes. However, their unique benefits are shadowed by the risk for fluid retention, weight gain, bone loss and congestive heart failure. This raises the question as to whether it is possible to build a safer generation of PPAR gamma-specific drugs that evoke fewer side effects while preserving insulin-sensitizing potential. Recent studies that have supported the continuing physiologic and therapeutic relevance of the PPAR gamma pathway also provide opportunities to develop newer classes of molecules that reduce or eliminate adverse effects. This review highlights key advances in understanding PPAR gamma signaling in energy homeostasis and metabolic disease and also provides new explanations for adverse events linked to TZD-based therapy.