Chronic inflammation in adipose tissue is highly associated with insulin resistance. Herein, we demonstrate that a novel modification of PPARγ is strongly associated with inflammatory responses in adipose tissue. c-Src kinase directly phosphorylated PPARγ at Tyr78, and this process was reversed by protein tyrosine phosphatase-1B (PTP-1B). In adipocytes, phosphorylation of PPARγ suppressed the expression of pro-inflammatory genes as well as the secretion of chemokines and cytokines, thus reducing macrophage migration. Importantly, pharmacological inhibition of c-Src kinase aggravated insulin resistance in obese mice with a concomitant increase in the expression of pro-inflammatory genes in adipose tissue. These data strongly suggest that PPARγ phosphorylation is the key regulatory mechanism of the inflammatory response in adipose tissue, which is highly associated with glucose tolerance and insulin sensitivity. Furthermore, these data increase our understanding of the mechanical aspects of developing novel anti-diabetic drugs targeting PPARγ phosphorylation.