The potent insulin-sensitizing effects of peroxisome proliferator-activated receptor gamma (PPARgamma) agonists are well established. However, it is still a matter of intense debate as to which tissue(s) represent the most critical sites of action for PPARgamma agonists, and what the relevant target genes are that ultimately mediate the improvements in insulin sensitivity. The cell type with the highest levels of PPARgamma is the adipocyte, and as such the adipocyte is an excellent candidate cell to look for critical mediators of PPARgamma agonist action. Adiponectin, an adipocyte-specific secretory protein, is upregulated in response to PPARgamma agonist exposure, and its serum levels consequently increase significantly. Genetic, pharmacological and clinical studies have demonstrated potent insulin-sensitizing effects of adiponectin. Here, we summarize the evidence that implicates adiponectin as a critical mediator of PPARgamma-agonist-mediated improvements in insulin sensitivity, particularly in the context of PPARgamma-agonist-mediated enhancements of hepatic insulin sensitivity.