Abstract Thiazolidinediones (TZD) are peroxisome proliferator-activated receptor γ (PPARγ) agonists that may reduce hepatic steatosis through their effects in adipose tissue and therefore have been assessed as potential therapies to treat nonalcoholic fatty liver disease (NAFLD) in humans. However, some studies suggest that expression and activation of hepatocyte PPARγ promotes steatosis and that would limit the benefits of TZD as a NAFLD therapy. To further explore this possibility, we examined the impact of short-term rosiglitazone maleate treatment after the development of moderate or severe diet-induced obesity, in both control and adult-onset hepatocyte-specific PPARγ knockout (PpargΔHep) mice. Independent of the level of obesity and hepatic PPARγ expression, the TZD treatment enhanced insulin sensitivity, associated with an increase in white adipose tissue (WAT) fat accumulation, consistent with clinical observations. However, TZD treatment increased hepatic triglyceride content only in control mice with severe obesity. Under these conditions, PpargΔHep reduced diet-induced steatosis and prevented the steatogenic effects of short-term TZD treatment. In these mice, subcutaneous WAT was enlarged and associated with increased levels of adiponectin, while hepatic levels of phosphorylated adenosine 5′-monophosphate–activated protein kinase were also increased. In addition, in mice with severe obesity, the expression of hepatic Cd36, Cidea, Cidec, Fabp4, Fasn, and Scd-1 was increased by TZD in a PPARγ-dependent manner. Taken together, these results demonstrate that hepatocyte PPARγ expression offsets the antisteatogenic actions of TZD in mice with severe obesity. Therefore, in obese and insulin resistant humans, TZD-mediated activation of hepatocyte PPARγ may limit the therapeutic potential of TZD to treat NAFLD.