The peroxisome proliferator-activated receptor γ (PPARγ) is a central regulator of adipogenesis and modulates glucose and lipid metabolism. In this study, herpesvirus-associated ubiquitin-specific protease (HAUSP) was isolated as a binding partner of PPARγ. Both endogenous and exogenous PPARγ associated with HAUSP in co-immunoprecipitation analysis. HAUSP, but not the catalytically inactive HAUSP C223S mutant, increased the stability of both endogenous and exogenous PPARγ through its deubiquitinating activity. Site-directed mutagenesis experiments showed that the Lys(462) residue of PPARγ is critical for ubiquitination. HBX 41,108, a specific inhibitor of HAUSP, abolished the increase in PPARγ stability induced by HAUSP. In addition, knockdown of endogenous HAUSP using siRNA decreased PPARγ protein levels. HAUSP enhanced the transcriptional activity of both exogenous and endogenous PPARγ in luciferase activity assays. Quantitative RT-PCR analysis showed that HAUSP increased the transcript levels of PPARγ target genes in HepG2 cells, resulting in the enhanced uptake of glucose and fatty acids, and vice versa, upon siRNA knockdown of HAUSP. In vivo analysis using adenoviruses confirmed that HAUSP, but not the HAUSP C223S mutant, decreased blood glucose and triglyceride levels, which are associated with the increased expression of endogenous PPARγ and lipid accumulation in the liver. Our results demonstrate that the stability and activity of PPARγ are modulated by the deubiquitinating activity of HAUSP, which may be a target for the development of anti-diabetic drugs.