We investigated the biological activity of a novel thiazolidinedione (TZD) derivative, KRP-297, and the molecular basis of this activity. When administered to obese Zucker fatty rats (obese rats) at 10 mg/kg for 2 weeks, KRP-297, unlike BRL-49,653, restored reduced lipid oxidation, that is, CO2 and ketone body production from [14C]palmitic acid, in the liver by 39% (P < 0.05) and 57% (P < 0.01), respectively. KRP-297 was also significantly more effective than BRL-49,653 in the inhibition of enhanced lipogenesis and triglyceride accumulation in the liver. To understand the molecular basis of the biological effects of KRP-297, we examined the effect on peroxisome proliferator-activated receptor (PPAR) isoforms, which may play key roles in lipid metabolism. Unlike classical TZD derivatives, KRP-297 activated both PPAR-alpha and PPAR-gamma, with median effective concentrations of 1.0 and 0.8 micromol/l, respectively. Moreover, radiolabeled [3H]KRP-297 bound directly to PPAR-alpha and PPAR-gamma with dissociation constants of 228 and 326 nmol/l, respectively. Concomitantly, KRP-297, but not BRL-49,653, increased the mRNA and the activity (1.5-fold [P < 0.01] and 1.8-fold [P < 0.05], respectively) of acyl-CoA oxidase, which has been reported to be regulated by PPAR-alpha, in the liver. By contrast, KRP-297 (P < 0.05) was less potent than BRL-49,653 (P < 0.01) in inducing the PPAR-gamma-regulated aP2 gene mRNA expression in the adipose tissues. These results suggest that PPAR-alpha agonism has a protective effect against abnormal lipid metabolism in liver of obese rats.