Obese patients have chronic, low-grade inflammation that predisposes to type 2 diabetes and results, in part, from dysregulated visceral white adipose tissue (WAT) functions. The specific signaling pathways underlying WAT dysregulation, however, remain unclear. Here we report that the PPARgamma signaling pathway operates differently in the visceral WAT of lean and obese mice. PPARgamma in visceral, but not subcutaneous, WAT from obese mice displayed increased sensitivity to activation by its agonist rosiglitazone. This increased sensitivity correlated with increased expression of the gene encoding the ubiquitin hydrolase/ligase ubiquitin carboxyterminal esterase L1 (UCH-L1) and with increased degradation of the PPARgamma heterodimerization partner retinoid X receptor alpha (RXRalpha), but not RXRbeta, in visceral WAT from obese humans and mice. Interestingly, increased UCH-L1 expression and RXRalpha proteasomal degradation was induced in vitro by conditions mimicking hypoxia, a condition that occurs in obese visceral WAT. Finally, PPARgamma-RXRbeta heterodimers, but not PPARgamma-RXRalpha complexes, were able to efficiently dismiss the transcriptional corepressor silencing mediator for retinoid and thyroid hormone receptors (SMRT) upon agonist binding. Increasing the RXRalpha/RXRbeta ratio resulted in increased PPARgamma responsiveness following agonist stimulation. Thus, the selective proteasomal degradation of RXRalpha initiated by UCH-L1 upregulation modulates the relative affinity of PPARgamma heterodimers for SMRT and their responsiveness to PPARgamma agonists, ultimately activating the PPARgamma-controlled gene network in visceral WAT of obese animals and humans.