The peroxisome proliferator–activated receptor-γ (PPAR-γ) is a nuclear receptor that is activated by lipids to induce the expression of genes involved in lipid and glucose metabolism, thereby converting nutritional signals into metabolic consequences. PPAR-γ is the target of the thiazolidinedione (TZD) class of insulin-sensitizing drugs, which have been widely prescribed to treat type 2 diabetes mellitus. A common side effect of treatment with TZDs is weight gain. Here we report a previously unknown role for central nervous system (CNS) PPAR-γ in the regulation of energy balance. We found that both acute and chronic activation of CNS PPAR-γ, by either TZDs or hypothalamic overexpression of a fusion protein consisting of PPAR-γ and the viral transcriptional activator VP16 (VP16–PPAR-γ), led to positive energy balance in rats. Blocking the endogenous activation of CNS PPAR-γ with pharmacological antagonists or reducing its expression with shRNA led to negative energy balance, restored leptin sensitivity in high-fat-diet (HFD)-fed rats and blocked the hyperphagic response to oral TZD treatment. These findings have implications for the widespread clinical use of TZD drugs and for understanding the etiology of diet-induced obesity.