In this study, we elucidated the mechanism by which adiponectin modulates hepatic stellate cell activation and fibrogenesis. Adiponectin-overexpressing transgenic mice receiving thioacetamide were resistant to fibrosis, compared with controls. In contrast, adiponectin-null animals developed severe fibrosis. Expression of collagen ␣1(I) and ␣-smooth muscle actin (␣-SMA) mRNAs were significantly lower in adiponectin-overexpressing mice, compared with controls. In wild-type stellate cells exposed to a lentivirus encoding adiponectin, expression of peroxisome proliferator-activated receptor-␥ (PPAR␥), SREBP1c, and CEBP␣ mRNAs was significantly increased (3.2-, 4.1-, and 2.2-fold, respectively; n ؍ 3; P < 0.05, adiponectin virus versus control), consistent with possible activation of an adipogenic transcriptional program. Troglitazone, a PPAR␥ agonist, strongly suppressed upregulation of collagen ␣1(I) and ␣-SMA mRNA in stellate cells isolated from wild-type mice; however, stellate cells from adiponectin-null animals failed to respond to troglitazone. Furthermore, in isolated stellate cells in which PPAR␥ was depleted using an adenovirus-Cre-recombinase system and in which adiponectin was also overexpressed, collagen ␣1(I) and ␣-SMA were significantly inhibited. We conclude that the PPAR␥ effect on stellate cell activation and the fibrogenic cascade appears to be adiponectin-dependent; however, the inhibitory effect of adiponectin on stellate cell activation was not dependent on PPAR␥, suggesting the presence of PPAR␥-dependent as well as independent pathways in stellate cells.