Depletion of peroxisome proliferator-activated receptor gamma (PPARgamma) accompanies myofibroblastic transdifferentiation of hepatic stellate cells (HSC), the primary cellular event underlying liver fibrogenesis. The treatment of activated HSC in vitro or in vivo with synthetic PPARgamma ligands suppresses the fibrogenic activity of HSC. However, it is uncertain whether PPARgamma is indeed a molecular target of this effect, because the ligands are also known to have receptor-independent actions. To test this question, the present study examined the effects of forced expression of PPARgamma via an adenoviral vector on morphologic and biochemical features of culture-activated HSC. The vector-mediated expression of PPARgamma itself is sufficient to reverse the morphology of activated HSC to the quiescent phenotype with retracted cytoplasm, prominent dendritic processes, reduced stress fibers, and accumulation of retinyl palmitate. These effects are abrogated by concomitant expression of a dominant negative mutant of PPARgamma that prevents transactivation of but not binding to the PPAR response element. PPARgamma expression also inhibits the activation markers such as the expression of alpha-smooth muscle actin, type I collagen, and transforming growth factor beta1; DNA synthesis; and JunD binding to the activator protein-1 (AP-1) site and AP-1 promoter activity. Inhibited JunD activity by PPARgamma is not due to reduced JunD expression or JNK activity or to a competition for p300. But it is due to a JunD-PPARgamma interaction as demonstrated by co-immunoprecipitation and glutathione S-transferase pull-down analysis. Further, the use of deletion constructs reveals that the DNA binding region of PPARgamma is the JunD interaction domain. In summary, our results demonstrate that the restoration of PPARgamma reverses the activated HSC to the quiescent phenotype and suppresses AP-1 activity via a physical interaction between PPARgamma and JunD.