The glucocorticoid receptor (GR) and peroxisome proliferator-activated receptors (PPARs) play important roles in the differentiation of mesenchymal cells. Glucocorticoids acting via the GR promote osteoblastic differentiation of bone marrow stromal cells, whereas PPAR ligands induce these cells to become adipocytes. To explore potential interactions between PPAR and GR pathways in osteoblasts, we studied the interaction between PPAR subtype-selective ligands and dexamethasone (DEX) in a murine calvaria-derived osteoblastic cell line (MB 1.8) that expresses endogenous GR and PPARs. In ligand-dependent transcription assays, the PPARgamma-selective ligand TZD [(5-(4-N-methyl-N(2-pyridyl)amino)ethoxy)benzyl)thiazolidine-2,4-dione], a thiazolidinedione antidiabetic, enhanced the effect of DEX to stimulate transcription of a glucocorticoid-inducible reporter gene (mouse mammary tumor virus-luciferase). No effect was seen with PPARalpha- or hNUC1/PPARdelta-selective ligands. The GR antagonist RU-486 inhibited the DEX and TZD responses, suggesting that the effects were mediated through endogenous GR. TZD also enhanced glucocorticoid-mediated transcription in SaOS-2/B10 human osteosarcomatous cells, but not in CV-1 cells, even though both cell lines were transfected with GR plasmid and expressed significant levels of endogenous PPARgamma messenger RNA. In MB 1.8 cells, TZD decreased alkaline phosphatase activity and the expression of osteoblast-associated genes while it up-regulated the adipocyte fatty acid-binding protein. DEX counteracted the effects of TZD on alkaline phosphatase enzyme activity and osteoblastic gene expression, but enhanced the actions of TZD on adipocyte fatty acid-binding protein. Interestingly, TZD inhibited in vitro bone nodule formation and mineralization, and DEX counteracted this effect. Thus, depending on the promoter context, TZD and DEX can oppose or enhance each other's actions on gene transcription. Collectively, these results point to a complex interaction between PPAR and GR signaling pathways that regulates the effects of TZD and DEX on osteoblastic differentiation. The mechanism of this interaction is still under investigation, but might involve PPAR -dependent and -independent pathways. As thiazolidinediones represent an important new class of drugs, our findings also raise the need for further studies in bone.