Estrogen receptors (ER) are important regulators of metabolic diseases such as obesity and insulin resistance (IR). While ERα seems to have a protective role in such diseases, the function of ERβ is not clear. To characterize the metabolic function of ERβ, we investigated its molecular interaction with a master regulator of insulin signaling/glucose metabolism, the PPARγ, in vitro and in high-fat diet (HFD)-fed ERβ -/- mice (βERKO) mice. Our in vitro experiments showed that ERβ inhibits ligand-mediated PPARγ-transcriptional activity. That resulted in a blockade of PPARγ-induced adipocytic gene expression and in decreased adipogenesis. Overexpression of nuclear coactivators such as SRC1 and TIF2 prevented the ERβ-mediated inhibition of PPARγ activity. Consistent with the in vitro data, we observed increased PPARγ activity in gonadal fat from HFD-fed βERKO mice. In consonance with enhanced PPARγ activation, HFD-fed βERKO mice showed increased body weight gain and fat mass in the presence of improved insulin sensitivity. To directly demonstrate the role of PPARγ in HFD-fed βERKO mice, PPARγ signaling was disrupted by PPARγ antisense oligonucleotide (ASO). Blockade of adipose PPARγ by ASO reversed the phenotype of βERKO mice with an impairment of insulin sensitization and glucose tolerance. Finally, binding of SRC1 and TIF2 to the PPARγ-regulated adiponectin promoter was enhanced in gonadal fat from βERKO mice indicating that the absence of ERβ in adipose tissue results in exaggerated coactivator binding to a PPARγ target promoter. Collectively, our data provide the first evidence that ERβ-deficiency protects against diet-induced IR and glucose intolerance which involves an augmented PPARγ signaling in adipose tissue. Moreover, our data suggest that the coactivators SRC1 and TIF2 are involved in this interaction. Impairment of insulin and glucose metabolism by ERβ may have significant implications for our understanding of hormone receptor-dependent pathophysiology of metabolic diseases, and may be essential for the development of new ERβ-selective agonists.