Thiazolidinediones (TZDs) such as rosiglitazone are antidiabetic peroxisome proliferator-activated receptor gamma (PPARgamma) agonists. PPARgamma agents improve diabetes by increasing insulin sensitivity and enhancing the differentiation of preadipocytes into adipocytes. The present study aimed to identify if 1-(4-chlorobenzoyl)-5-hydroxy-2-methyl-3-indoleacetitic acid (GY3), a newly synthesized indole compound, could enhance adipocytes differentiation and insulin sensitivity. The results showed that both GY3 and rosiglitazone significantly increased the lipid accumulating of 3T3-L1 adipocytes induced by isobutylmethylxanthine, dexamethasone and insulin mixture, but GY3 (not rosiglitazone) failed to increase the lipid accumulation when induced by insulin alone. In addition, GY3- or rosiglitaozne-induced protein expression of GLUT4 and adiponectin was determined by Western blot analysis. GY3 activated PPARalpha weakly but did not affect PPARgamma, while rosiglitazone activated PPARgamma significantly, suggesting different mechanisms between GY3 and rosiglitazone on adipocyte differentiation. Furthermore, both GY3 and rosiglitazone enhanced the adiponectin and insulin pathway proteins expression and adiponectin secretion in mature adipocytes, but only GY3 not rosiglitazone elevated gene expression of leptin and resistin. Both GY3 and rosiglitazone enhanced glucose consumption in HepG2 cells especially in the presence of insulin. In the in vivo study, GY3 decreased serum glucose and insulin in db/db mice, indicating the insulin sensitizing effect might contribute to its antidiabetic mechanism. Altogether, these results suggest that GY3 could improve insulin resistance and lower glucose level, GY3 and its derivatives might be developed as a substitution therapy for diseases with insulin resistance.