Adipocytes express the cystathionine γ lyase (CSE)-hydrogen sulfide (H2S) system. CSE-H2S promotes adipogenesis but ameliorates adipocyte insulin resistance. We investigated the mechanism of how CSE-H2S induces these paradoxical effects. First, we confirmed that an H2S donor or CSE overexpression promoted adipocyte differentiation. Second, we found that H2S donor inhibited but CSE inhibition increased phosphodiesterase (PDE) activity. H2S replacing isobutylmethylxanthine in the differentiation program induced adipocyte differentiation in part. Inhibiting PDE activity by H2S induced peroxisome proliferator activated receptor γ (PPARγ) protein and mRNA expression. Of note, H2S directly sulfhydrated PPARγ protein. Sulfhydrated PPARγ increased its nuclear accumulation, DNA binding activity and adipogenesis gene expression, thereby increasing glucose uptake and lipid storage, which were blocked by the desulfhydration reagent DTT. H2S induced PPARγ sulfhydration, which was blocked by mutation of the C139 site of PPARγ. In mice fed a high-fat diet (HFD) for 4 weeks, the CSE inhibitor decreased but H2S donor increased adipocyte numbers. In obese mice fed an HFD for 13 weeks, H2S treatment increased PPARγ sulfhydration in adipose tissues and attenuated insulin resistance but did not increase obesity. In conclusion, CSE-H2S increased PPARγ activity by direct sulfhydration at the C139 site, thereby changing glucose into triglyceride storage in adipocytes. CSE-H2S-mediated PPARγ activation might be a new therapeutic target for diabetes associated with obesity.