We examined the effects of activation of peroxisome proliferator-activated receptor (PPAR)alpha, PPARgamma, and both of them in combination in obese diabetic KKAy mice and investigated the mechanisms by which they improve insulin sensitivity. PPARalpha activation by its agonist, Wy-14,643, as well as PPARgamma activation by its agonist, rosiglitazone, markedly improved insulin sensitivity. Interestingly, dual activation of PPARalpha and -gamma by a combination of Wy-14,643 and rosiglitazone showed increased efficacy. Adipocyte size in Wy-14,643-treated KKAy mice was much smaller than that of vehicle- or rosiglitazone-treated mice, suggesting that activation of PPARalpha prevents adipocyte hypertrophy. Moreover, Wy-14,643 treatment reduced inflammation and the expression of macrophage-specific genes in white adipose tissue (WAT). Importantly, Wy-14,643 treatment upregulated expression of the adiponectin receptor (AdipoR)-1 and AdipoR2 in WAT, which was decreased in WAT of KKAy mice compared with that in nondiabetic control mice. Furthermore, Wy-14,643 directly increased expression of AdipoRs and decreased monocyte chemoattractant protein-1 expression in adipocytes and macrophages. Rosiglitazone increased serum adiponectin concentrations and the ratio of high molecular weight multimers of adiponectin to total adiponectin. A combination of rosiglitazone and Wy-14,643 increased both serum adiponectin concentrations and AdipoR expression in WAT. These data suggest that PPARalpha activation prevents inflammation in WAT and that dual activation of PPARalpha and -gamma enhances the action of adiponectin by increasing both adiponectin and AdipoRs, which can result in the amelioration of obesity-induced insulin resistance.