The dual peroxisome-proliferator-activated receptor (PPAR) α/γ agonist tesaglitazar has been shown to produce fibrosarcomas in rats. Here, the authors studied morphology, proliferation, differentiation, and inflammation markers in adipose tissue from rats exposed to 1, 3, or 10 µmol/kg tesaglitazar for 2 or 12 weeks, including recovery groups (12 weeks treatment followed by 12 weeks recovery), and 3 or 10 µmol/kg tesaglitazar for 24 weeks. Subcutaneous white and brown fat revealed reversible dose-related histopathological alterations and after 12 and 24 weeks developed areas of thickened skin (fatty lumps). There was a dose-dependent increase in proliferation of interstitial cells in white and brown fat as shown by increased mitotic index in all dose groups after 2 weeks. This was limited to the high dose after 12 and 24 weeks in white fat. Gene expression analyses showed that while tesaglitazar induced differentiation of adipose tissue characterized with a switch in cyclin D1 and D3 mRNA by 12 weeks, longer exposure at high doses reversed this differentiation concurrent with a reappearance of early adipocyte and inflammatory markers. These data suggest that sustained increased turnover of mesenchymal cells in adipose tissues, concomitant with onset of inflammation and fibrosis, drives development of fibrosarcomas in rats treated with tesaglitazar.