The nuclear receptor peroxisome proliferator-activated receptors (PPARs) are important in regulating lipid metabolism and inflammatory responses in macrophages. Activation of PPARγ represses key inflammatory response gene expressions. Recently, we identified a new cholesterol metabolite, 25-hydroxycholesterol-3-sulfate (25HC3S), as a potent regulatory molecule of lipid metabolism. In this paper, we report the effect of 25HC3S and its precursor 25-hydroxycholesterol (25HC) on PPARγ activity and on inflammatory responses. Addition of 25HC3S to human macrophages markedly increased nuclear PPARγ and cytosol IκB and decreased nuclear NF-κB protein levels. PPARγ response element reporter gene assays showed that 25HC3S significantly increased luciferase activities. PPARγ competitor assay showed that the Ki for 25HC3S was ∼1 μM, similar to those of other known natural ligands. NF-κB-dependent promoter reporter gene assays showed that 25HC3S suppressed TNFα-induced luciferase activities only when cotransfected with pcDNAI-PPARγ plasmid. In addition, 25HC3S decreased LPS-induced expression and release of IL-1β. In the PPARγ-specific siRNA transfected macrophages or in the presence of PPARγ-specific antagonist, 25HC3S failed to increase IκB and to suppress TNFα and IL-1β expression. In contrast to 25HC3S, its precursor 25HC, a known liver X receptor ligand, decreased nuclear PPARγ and cytosol IκB and increased nuclear NF-κB protein levels. We conclude that 25HC3S acts in macrophages as a PPARγ ligand and suppresses inflammatory responses via the PPARγ/IκB/NF-κB signaling pathway.