Pharmacological activators of peroxisome proliferator-activated receptor-gamma (PPARgamma) inhibit growth of non-small-cell lung cancer (NSCLC) cell lines in vitro and in xenograft models. Because these agents engage off-target pathways, we have assessed the effects of PPARgamma by overexpressing the protein in NSCLC cells. We reported previously that increased PPARgamma inhibits transformed growth and invasiveness and promotes epithelial differentiation in a panel of NSCLC expressing oncogenic K-Ras. These cells express high levels of cyclooxygenase-2 (COX-2) and produce high levels of prostaglandin E(2) (PGE(2)). The goal of these studies was to identify the molecular mechanisms whereby PPARgamma inhibits tumorigenesis. Increased PPARgamma inhibited expression of COX-2 protein and promoter activity, resulting in decreased PGE(2) production. Suppression of COX-2 was mediated through increased activity of the tumor suppressor phosphatase and tensin homolog, leading to decreased levels of phospho-Akt and inhibition of nuclear factor-kappaB activity. Pharmacological inhibition of PGE(2) production mimicked the effects of PPARgamma on epithelial differentiation in three-dimensional culture, and exogenous PGE(2) reversed the effects of increased PPARgamma activity. Transgenic mice overexpressing PPARgamma under the control of the surfactant protein C promoter had reduced expression of COX-2 in type II cells and were protected against developing lung tumors in a chemical carcinogenesis model. These data indicate that high levels of PGE(2) as a result of elevated COX-2 expression are critical for promoting lung tumorigenesis and that the antitumorigenic effects of PPARgamma are mediated in part through blocking this pathway.