The peroxisome proliferator-activated receptor gamma (PPARgamma) is an important therapeutic drug target for several conditions, including diabetes, inflammation, dyslipidemia, hypertension, and cancer. It is shown that an antagonist or partial agonist of PPARgamma has attractive potential applications in the discovery of novel antidiabetic agents that may retain efficacious insulin-sensitizing properties and minimize potential side effects. In this work, the dipeptide H-Trp-Glu-OH (G3335) was discovered to be a novel PPARgamma antagonist. Biacore 3000 results based on the surface plasmon resonance (SPR) technique showed that G3335 exhibits a highly specific binding affinity against PPARgamma (K(D) = 8.34 microM) and is able to block rosiglitazone, a potent PPARgamma agonist, in the stimulation of the interaction between the PPARgamma ligand-binding domain (LBD) and RXRalpha-LBD. Yeast two-hybrid assays demonstrated that G3335 exhibits strong antagonistic activity (IC50 = 8.67 microM) in perturbing rosiglitazone in the promotion of the PPARgamma-LBD-CBP interaction. Moreover, in transactivation assays, G3335 was further confirmed as an antagonist of PPARgamma in that G3335 could competitively bind to PPARgamma against 0.1 microM rosiglitazone to repress reporter-gene expression with an IC50 value of 31.9 muM. In addition, homology modeling and molecular-docking analyses were performed to investigate the binding mode of PPARgamma-LBD with G3335 at the atomic level. The results suggested that residues Cys285, Arg288, Ser289, and His449 in PPARgamma play vital roles in PPARgamma-LBD-G3335 binding. The significance of Cys285 for PPARgamma-LBD-G3335 interaction was further demonstrated by PPARgamma point mutation (PPARgamma-LBD-Cys285Ala). It is hoped our current work will provide a powerful approach for the discovery of PPARgamma antagonists, and that G3335 might be developed as a possible lead compound in diabetes research.