Thyroid hormone (T3) is critical for growth, differentiation, and maintenance of metabolic homeostasis. Mice with a knock-in mutation in the thyroid hormone receptor alpha gene (TRalpha1PV) were created previously to explore the roles of mutated TRalpha1 in vivo. TRalpha1PV is a dominant negative mutant with a frameshift mutation in the carboxyl-terminal 14 amino acids that results in the loss of T3 binding and transcription capacity. Homozygous knock-in TRalpha1(PV/PV) mice are embryonic lethal, and heterozygous TRalpha1(PV/+) mice display the striking phenotype of dwarfism. These mutant mice provide a valuable tool for identifying the defects that contribute to dwarfism. Here we show that white adipose tissue (WAT) mass was markedly reduced in TRalpha1(PV/+) mice. The expression of peroxisome proliferator-activated receptor gamma (PPARgamma), the key regulator of adipogenesis, was repressed at both mRNA and protein levels in WAT of TRalpha1(PV/+) mice. Moreover, TRalpha1PV acted to inhibit the transcription activity of PPARgamma by competition with PPARgamma for binding to PPARgamma response elements and for heterodimerization with the retinoid X receptors. The expression of TRalpha1PV blocked the T3-dependent adipogenesis of 3T3-L1 cells and repressed the expression of PPARgamma. Thus, mutations of TRalpha1 severely affect adipogenesis via cross talk with PPARgamma signaling. The present study suggests that defects in adipogenesis could contribute to the phenotypic manifestation of reduced body weight in TRalpha1(PV/+) mice.