Ligands of peroxisome proliferator-activated receptor-gamma (PPAR-gamma) abrogate the stimulation of collagen gene transcription induced by transforming growth factor-beta (TGF-beta). Here, we delineate the mechanisms underlying this important novel physiological function for PPAR-gamma in connective tissue homeostasis. First, we demonstrated that antagonistic regulation of TGF-beta activity by PPAR-gamma ligands involves cellular PPAR-gamma, since 15-deoxy-Delta12,14-prostaglandin J(2) (15d-PGJ(2)) failed to block TGF-beta-induced responses in either primary cultures of PPAR-gamma-null murine embryonic fibroblasts, or in normal human skin fibroblasts with RNAi-mediated knockdown of PPAR-gamma. Next, we examined the molecular basis underlying the abrogation of TGF-beta signaling by PPAR-gamma in normal human fibroblasts in culture. The results demonstrated that Smad-dependent transcriptional responses were blocked by PPAR-gamma without preventing Smad2/3 activation. In contrast, the interaction between activated Smad2/3 and the transcriptional coactivator and histone acetyltransferase p300 induced by TGF-beta, and the accumulation of p300 on consensus Smad-binding DNA sequences and histone H4 hyperacetylation at the COL1A2 locus, were all prevented by PPAR-gamma. Wild-type p300, but not a mutant form of p300 lacking functional histone acetyltransferase, was able to restore TGF-beta-induced stimulation of COL1A2 in the presence of PPAR-gamma ligands. Collectively, these results indicate that PPAR-gamma blocked Smad-mediated transcriptional responses by preventing p300 recruitment and histone H4 hyperacetylation, resulting in the inhibition of TGF-beta-induced collagen gene expression. Pharmacological activation of PPAR-gamma thus may represent a novel therapeutic approach to target p300-dependent TGF-beta profibrotic responses such as stimulation of collagen gene expression.