Chromosomal translocations that encode fusion oncoproteins have been observed consistently in leukemias/lymphomas and sarcomas but not in carcinomas, the most common human cancers. Here, we report that t(2;3)(q13;p25), a translocation identified in a subset of human thyroid follicular carcinomas, results in fusion of the DNA binding domains of the thyroid transcription factor PAX8 to domains A to F of the peroxisome proliferator–activated receptor (PPAR) γ1. PAX8-PPARγ1 mRNA and protein were detected in 5 of 8 thyroid follicular carcinomas but not in 20 follicular adenomas, 10 papillary carcinomas, or 10 multinodular hyperplasias. PAX8-PPARγ1 inhibited thiazolidinedione-induced transactivation by PPARγ1 in a dominant negative manner. The experiments demonstrate an oncogenic role for PPARγ and suggest that PAX8-PPARγ1 may be useful in the diagnosis and treatment of thyroid carcinoma.