Peroxisome proliferator‐activated receptor γ (PPARγ) acts as a ligand‐dependent transcription factor with a key role in mediating adipocyte differentiation and insulin sensitivity. Recently, we and others have shown that PPARγ recruits the nuclear corepressors NCoR and silencing mediator for retinoid and thyroid hormone receptors (SMRT) to modulate adipogenesis. While the synthetic ligands for PPARγ, the thiazolidinediones (TZD), are widely used in the treatment of type 2 diabetes mellitus, the biologically relevant endogenous PPARγ ligand involved in adipogenesis remains unidentified. To further understand the role of ligand binding and corepressor interaction in PPARγ‐mediated adipogenesis, a mutation was introduced in the ligand‐binding domain (LBD) of murine PPARγ. PPARγmut was created via two amino acid substitutions known to be major determinants of ligand selectivity among PPAR isotypes, H323Y and R288M. These mutations alter PPARγ to the corresponding residues of the PPARα. Characterizing the in vitro functional properties of this mutant, we show that PPARγmut preferentially responds to the PPARα agonist, WY‐14643, over the TZD, pioglitazone. When expressed in 3T3‐L1 preadipocytes using recombinant adenovirus, wild‐type PPARγ leads to adipocyte formation with both hormonal and TZD treatment. PPARγmut blocks the upregulation of adipocyte‐specific proteins by TZD, but surprisingly, not by standard hormonal inducers. Our data suggest that TZDs and the purported endogenous ligand do not interact in the same way with the PPARγ LBD. We propose that the endogenous ligand has distinct properties that allow for promiscuity within the hydrophobic PPAR ligand‐binding pocket, yet fosters appropriate cofactor recruitment and release to allow adipogenesis to proceed.