Peroxisome proliferator-activated receptor γ (PPARγ) is constitutively expressed at high levels in healthy alveolar macrophages, in contrast to other tissue macrophages and blood monocytes. PPARγ ligands have been shown to down-regulate IFN-γ-stimulated inducible NO synthase (iNOS) in macrophages. Because NO is an important inflammatory mediator in the lung, we hypothesized that deletion of alveolar macrophage PPARγ in vivo would result in up-regulation of iNOS and other inflammatory mediators. The loss of PPARγ in macrophages was achieved by crossing floxed (+/+) PPARγ mice and a transgenic mouse containing the CRE recombinase gene under the control of the murine M lysozyme promoter (PPARγKO). Alveolar macrophages were harvested by bronchoalveolar lavage (BAL). Lymphocytes (CD8:CD4 ratio = 2.8) were increased in BAL of PPARγKO vs wild-type C57BL6; p ≤ 0.0001. Both iNOS and IFN-γ expression were significantly elevated (p ≤ 0.05) in BAL cells. Th-1 associated cytokines including IL-12 (p40), MIP-1α (CCL3), and IFN inducible protein-10 (IP-10, CXCL10) were also elevated. IL-4 and IL-17A were not detected. To test whether these alterations were due to the lack of PPARγ, PPARγ KO mice were intratracheally inoculated with a PPARγ lentivirus construct. PPARγ transduction resulted in significantly decreased iNOS and IFN-γ mRNA expression, as well as reduced BAL lymphocytes. These results suggest that lack of PPARγ in alveolar macrophages disrupts lung homeostasis and results in a Th1-like inflammatory response.