Mice deficient small heterodimer partner (SHP) are protected from diet induced hepatic steatosis due to increased fatty acid oxidation and decreased lipogenesis. The decreased lipogenesis appears to be a direct consequence of very low expression of peroxisome proliferator activated receptor gamma 2 (PPARγ2), a potent lipogenic transcription factor, in the SHP−/− liver. The current study focuses on the identification of a SHP dependent regulatory cascade that controls PPARγ2 gene expression, thereby regulating hepatic fat accumulation. Illumina BeadChip array and real-time polymerase chain reaction were used to identify genes responsible for the linkage between SHP and PPARγ2 using hepatic RNAs isolated from SHP−/− and SHP-overexpressing mice. The initial efforts identify that hairy and enhancer of split 6 (Hes6), a novel transcriptional repressor, is an important mediator of the regulation of PPARγ2 transcription by SHP. The Hes6 promoter is specifically activated by the retinoic acid receptor (RAR) in response to its natural agonist ligand all-trans retinoic acid (atRA), and is repressed by SHP. Hes6 subsequently represses hepatocyte nuclear factor 4 alpha (HNF4α) activated-PPARγ2 gene expression via direct inhibition of the HNF4α transcriptional activity. Furthermore, we provide evidences that atRA treatment or adenovirus-mediated RARα overexpression significantly reduced hepatic fat accumulation in obese mouse models as observed in earlier studies and the beneficial effect is achieved via the proposed transcriptional cascade.