FK506-binding protein-51 (FKBP51) is a molecular cochaperone recently shown to be a positive regulator of peroxisome proliferator-activated receptor (PPAR)γ, the master regulator of adipocyte differentiation and function. In cellular models of adipogenesis, loss of FKBP51 not only reduced PPARγ activity but also reduced lipid accumulation, suggesting that FKBP51 knock-out (KO) mice might have insufficient development of adipose tissue and lipid storage ability. This model was tested by examining wild-type (WT) and FKBP51-KO mice under regular and high-fat diet conditions. Under both diets, FKBP51-KO mice were resistant to weight gain, hepatic steatosis, and had greatly reduced white adipose tissue (WAT) but higher amounts of brown adipose tissue. Under high-fat diet, KO mice were highly resistant to adiposity and exhibited reduced plasma lipids and elevated glucose and insulin tolerance. Profiling of perigonadal and sc WAT revealed elevated expression of brown adipose tissue lineage genes in KO mice that correlated increased energy expenditure and a shift of substrate oxidation to carbohydrates, as measured by indirect calorimetry. To directly test PPARγ involvement, WT and KO mice were fed rosiglitazone agonist. In WT mice, rosiglitazone induced whole-body weight gain, increased WAT mass, a shift of substrate oxidation to lipids, and elevated expression of PPARγ-regulated lipogenic genes in WAT. In contrast, KO mice had reduced rosiglitazone responses for these parameters. Our results identify FKBP51 as an important regulator of PPARγ in WAT and as a potential new target in the treatment of obesity and diabetes.