The objective of the study was to test for an association between type 2 diabetes mellitus (T2DM) and the Pro12Ala polymorphism in the peroxisome proliferator-activated receptor gamma gene (PPAR-gamma) in families from Colorado. We were also interested in whether there was any modification by diet or physical activity. We studied 216 Hispanic pedigrees (1850 nuclear families) and 236 non-Hispanic white (NHW) pedigrees (1240 families) from the San Luis Valley and Denver, CO. We genotyped the Pro12Ala polymorphism of the PPAR-gamma gene. Historical physical activity (average metabolic equivalent task units per week) as well as average dietary intake over the past year was assessed by self-report. Using the family-based association test, we found that in NHWs the Pro12 allele was associated with T2DM only among those with low physical activity (P = .006), or with high polyunsaturated fat intake (P = .034). A significant interaction between low physical activity and the Pro12 allele in association with T2DM was also detected using generalized estimating equations models (P = .022). Furthermore, after stratifying by physical activity similar to the family-based association test, we found the Pro12 allele was significantly associated with T2DM in those with low physical activity (odds ratio, 2.37; 95% confidence interval, 1.14-4.94). There may be a gene-environment interaction between the Pro12 allele of the PPAR-gamma gene and physical activity that results in increased risk of T2DM in NHWs.