The nuclear hormone receptor peroxisome proliferator-activated receptor g (PPARg) plays a central role in adipogenesis, glucose homeostasis, and is the molecular target for the thiazolidinedione (TZD) class of antidiabetic drugs. Activation of PPARg by TZDs improves insulin sensitivity, however this is accompanied by the induction of several undesirable side-effects. We have identified a novel synthetic PPARg ligand, T2384, to explore the biological activities associated with occupying different regions of the receptor ligand binding pocket. X-ray crystallography studies revealed that T2384 can adopt two distinct binding modes, which we have termed “U” and “S”, interacting with the ligand-binding pocket of PPARg primarily via hydrophobic contacts that are distinct from full agonists. The different binding modes occupied by T2384 induced distinct patterns of co-regulatory protein interaction with PPARg in vitro and displayed unique receptor function in cell-based activity assays. We speculate that these unique biochemical and cellular activities may be responsible for the novel in vivo profile observed in animals treated systemically with T2384. When administered to diabetic KKAy mice, T2384 rapidly improved insulin sensitivity in the absence of weight gain, hemodilution, and anemia characteristics of treatment with rosiglitazone (a TZD). Moreover, upon co-administration with rosiglitazone, T2384 was able to antagonize the side-effects induced by rosiglitazone treatment alone, while retaining robust effects on glucose disposal. These results are consistent with the hypothesis that interactions between ligands and specific regions of the receptor ligand-binding pocket might selectively trigger a subset of receptor-mediated biological responses leading to improvement of insulin sensitivity, without eliciting less desirable responses associated with full activation of the receptor. We suggest that T2384 may represent a prototype for a novel class of PPARg ligand, and furthermore, that molecules sharing some of these properties, would be useful for treatment of type 2 diabetes.