This report identifies a novel gene encoding 15-oxoprostaglandin-Delta13-reductase (PGR-2), which catalyzes the reaction converting 15-keto-PGE2 to 13,14-dihydro-15-keto-PGE2. The expression of PGR-2 is up-regulated in the late phase of 3T3-L1 adipocyte differentiation and predominantly distributed in adipose tissue. Overexpression of PGR-2 in cells decreases peroxisome proliferator-activated receptor gamma (PPARgamma)-dependent transcription and prohibits 3T3-L1 adipocyte differentiation without affecting expression of PPARgamma. Interestingly, we found that 15-keto-PGE2 can act as a ligand of PPARgamma to increase co-activator recruitment, thus activating PPARgamma-mediated transcription and enhancing adipogenesis of 3T3-L1 cells. Overexpression of 15-hydroxyprostaglandin dehydrogenase, which catalyzes the oxidation reaction of PGE2 to form 15-keto-PGE2, significantly increased PPARgamma-mediated transcription in a PGE2-dependent manner. Reciprocally, overexpression of wild-type PGR-2, but not the catalytically defective mutant, abolished the effect of 15-keto-PGE2 on PPARgamma activation. These results demonstrate a novel link between catabolism of PGE2 and regulation of ligand-induced PPARgamma activation.