The design, synthesis, structure-activity relationship, and biological activity of 2,4-thiazolidinedione derivatives as peroxisome proliferator-activated receptor-γ (PPAR-γ) modulators for antidiabetic activity are reported. Fifteen 2,4-thiazolidinedione derivatives clubbed with pyrazole moiety were docked into the ligand binding domain of PPAR-γ by the Glide XP module of Schrodinger. Eight derivatives (5a, 5b, 5d, 5f, 5i, 5l, 5n, 5o) having Glide XP scores > -8 as compared to the standard drug, rosiglitazone (Glide XP score = -9.165), showed almost similar interaction with the amino acids such as HIS 449, TYR 473, TYR 327, HIS 323, and SER 289 in the molecular docking studies. These eight derivatives were further screened for PPAR-γ transactivation and in vivo blood glucose lowering activity in the streptozotocin-induced diabetic rat model. Compounds 5o, 5n, 5a, 5i, and 5b showed 52.06, 51.30, 48.65, 43.13, and 40.36% PPAR-γ transactivation as compared to the reference drugs rosiglitazone and pioglitazone with 85.30 and 65.22% transactivation, respectively. The data analysis showed significant blood glucose lowering effects (hypoglycemia) of compounds 5o, 5n, and 5a (140.1 ± 4.36, 141.4 ± 6.15, and 150.7 ± 4.15, respectively), along with reference drugs pioglitazone (135.2 ± 4.91) and rosiglitazone (141.1 ± 5.88) as compared to the diabetic control. Furthermore, the most potent compound 5o also elevated the PPAR-γ gene expression by 2.35-fold as compared to rosiglitazone (1.27-fold) and pioglitazone (1.6-fold). It also significantly lowered the AST, ALT, and ALP levels and caused no damage to the liver.