Recent reports demonstrate that peroxisome proliferator-activated receptor gamma (PPARgamma), a member of the nuclear receptor superfamily, acts as a repressor of type I collagen synthesis. Our data demonstrate that exogenously expressed PPARgamma down-regulates collagen expression in a dose-responsive manner in human lung fibroblast cells. Silencing PPARgamma using lentiviruses expressing short hairpin RNAs partially reverses interferon-gamma (IFN-gamma)-induced repression and activates collagen mRNA levels. Previous studies indicate that IFN-gamma represses collagen gene expression and induces major histocompatibility complex II (MHC II) expression by activating the formation of a regulatory factor for X-box 5 (RFX5) complex with class II transactivator (CIITA). This report demonstrates that PPARgamma is within the RFX5.CIITA complex as judged by co-immunoprecipitation and DNA affinity precipitation studies. Most importantly, occupancy of PPARgamma on the collagen transcription start site and MHC II promoter increases with IFN-gamma treatment. The PPARgamma agonist, troglitazone, sensitizes the cells to IFN-gamma treatment by increasing recruitment of PPARgamma to collagen gene while repressing collagen expression, and these effects are blocked by the PPARgamma antagonist T0070907. PPARgamma may mediate IFN-gamma-stimulated collagen transcription down-regulation and MHC II up-regulation by interacting with CIITA as well as regulating CIITA expression. Therefore, PPARgamma is a critical target for investigations into therapeutics of diseases involving extracellular matrix remodeling and the immune response.