Chronic obstructive pulmonary disease (COPD) is a progressive inflammatory condition and a leading cause of death, with no available cure. We assessed the actions in pulmonary epithelial cells of peroxisome proliferator-activated receptor γ (PPARγ), a nuclear hormone receptor with anti-inflammatory effects, whose role in COPD is largely unknown. We found that PPARγ was down-regulated in lung tissue and epithelial cells of COPD patients, via both reduced expression and phosphorylation-mediated inhibition, whereas pro-inflammatory nuclear factor-κB (NF-κB) activity was increased. Cigarette smoking is the main risk factor for COPD, and exposing airway epithelial cells to cigarette smoke extract (CSE) likewise down-regulated PPARγ and activated NF-κB. CSE also down-regulated and post-translationally inhibited the glucocorticoid receptor (GR-α) and histone deacetylase 2 (HDAC2), a corepressor important for glucocorticoid action and whose down-regulation is thought to cause glucocorticoid insensitivity in COPD. Treating epithelial cells with synthetic (rosiglitazone) or endogenous (10-nitro-oleic acid) PPARγ agonists strongly up-regulated PPARγ expression and activity, suppressed CSE-induced production and secretion of inflammatory cytokines, and reversed its activation of NF-κB by inhibiting the IκB kinase pathway and by promoting direct inhibitory binding of PPARγ to NF-κB. In contrast, PPARγ knockdown via siRNA augmented CSE-induced chemokine release and decreases in HDAC activity, suggesting a potential anti-inflammatory role of endogenous PPARγ. The results imply that down-regulation of pulmonary epithelial PPARγ by cigarette smoke promotes inflammatory pathways and diminishes glucocorticoid responsiveness, thereby contributing to COPD pathogenesis, and further suggest that PPARγ agonists may be useful for COPD treatment. Background: The mechanistic role of peroxisome proliferator-activated receptor γ (PPARγ) in chronic obstructive pulmonary disease (COPD) is poorly understood. Results: COPD and cigarette smoke exposure down-regulated PPARγ and produced inflammation that PPARγ agonists reversed through multiple pathways. Conclusion: PPARγ plays a pivotal role in COPD. Significance: PPARγ agonists may be the first effective treatment for COPD.