The nuclear receptor peroxisome proliferator-activated receptor gamma (PPARgamma) is a ligand-dependent transcription factor that acts as a primary regulator of adipogenesis and controls adipocyte metabolism and insulin action. Increased expression of tumor necrosis factor (TNFalpha) in adipose tissue of obese subjects potently suppresses the expression of PPARgamma and attenuates adipocyte functions. Here we show that PPARgamma is a substrate of caspase-3 and caspase-6 during TNFalpha receptor signaling in adipocytes, and the consequent PPARgamma cleavage disrupts its nuclear localization. TNFalpha treatment of 3T3-L1 adipocytes decreases full-length PPARgamma while increasing the level of a 45-kDa immunoreactive PPARgamma fragment. Specific inhibitors of caspase-3 and caspase-6 attenuate the cleavage of PPARgamma protein in response to TNFalpha in cultured adipocytes. Incubation of nuclear fractions with recombinant caspase-3 and caspase-6 also generates a 45-kDa PPARgamma cleavage product. Dispersion of nuclear PPARgamma to the cytoplasm in response to TNFalpha treatment occurs in parallel with detection of activated caspase-3. We suggest that activation of the caspase cascade by TNFalpha down-regulates PPARgamma protein and PPARgamma-mediated metabolic processes in adipose cells.