TonEBP is a key transcription factor in cellular adaptation to hypertonic stress, and also in macrophage activation. Since TonEBP is involved in inflammatory diseases such as rheumatoid arthritis and atherosclerosis, we asked whether TonEBP played a role in adipogenesis and insulin resistance. Here we report that TonEBP suppresses adipogenesis and insulin signaling by inhibiting expression of the key transcription factor PPARγ2. TonEBP binds to the PPARγ2 promoter and blocks the epigenetic transition of the locus which is required for the activation of the promoter. When TonEBP expression is reduced, the epigenetic transition and PPARγ2 expression are markedly increased leading to enhanced adipogenesis and insulin response while inflammation is reduced. Thus, TonEBP is an independent determinant of adipose insulin sensitivity and inflammation. TonEBP is an attractive therapeutic target for insulin resistance in lieu of PPARγ agonists.