Obesity is a major risk factor for psoriasis, but how obesity disrupts the regulatory mechanisms that keep skin inflammation in check is unclear. Here, we found that skin was enriched with a unique population of CD4Foxp3 regulatory T (Treg) cells expressing the nuclear receptor peroxisome proliferation-activated receptor gamma (PPARγ). PPARγ drove a distinctive transcriptional program and functional suppression of IL-17A γδ T cell-mediated psoriatic inflammation. Diet-induced obesity, however, resulted in a reduction of PPARγ skin Treg cells and a corresponding loss of control over IL-17A γδ T cell-mediated inflammation. Mechanistically, PPARγ skin Treg cells preferentially took up elevated levels of long-chain free fatty acids in obese mice, which led to cellular lipotoxicity, oxidative stress, and mitochondrial dysfunction. Harnessing the anti-inflammatory properties of these PPARγ skin Treg cells could have therapeutic potential for obesity-associated inflammatory skin diseases.