Transforming growth factor-β (TGF-β), a potent inducer of collagen synthesis, is implicated in pathological fibrosis. Peroxisome proliferator-activated receptor-γ (PPAR-γ) is a nuclear hormone receptor that regulates adipogenesis and numerous other biological processes. Here, we demonstrate that collagen gene expression was markedly elevated in mouse embryonic fibroblasts (MEFs) lacking PPAR-γ compared to heterozygous control MEFs. Treatment with the PPAR-γ ligand 15d-PGJ₂ failed to down-regulate collagen gene expression in PPAR-γ null MEFs, whereas reconstitution of these cells with ectopic PPAR-γ resulted in their normalization. Compared to control MEFs, PPAR-γ null MEFs displayed elevated levels of the Type I TGF-β receptor (TβRI), and secreted more TGF-β1 into the media. Furthermore, PPAR-γ null MEFs showed constitutive phosphorylation of cellular Smad2 and Smad3, even in the absence of exogenous TGF-β, which was abrogated by the ALK5 inhibitor SB431542. Constitutive Smad2/3 phosphorylation in PPAR-γ null MEFs was associated with Smad3 binding to its cognate DNA recognition sequences, and interaction with coactivator p300 previously implicated in TGF-β responses. Taken together, these results indicate that loss of PPAR-γ in MEFs is associated with upregulation of collagen synthesis, and activation of intracellular Smad signal transduction, due, at least in part, to autocrine TGF-β stimulation.