Peroxisome proliferator-activated receptor-γ (PPARγ) is a ligand-activated nuclear receptor and plays an essential role in insulin signaling. Macrophage infiltration into adipose tissue is a character of metabolic inflammation and closely related to insulin resistance in type 2 diabetes. The mechanism by which pro-inflammatory macrophages cause insulin resistance remains to be elucidated. Here we showed that co-culture with macrophages significantly suppressed the transcriptional activity of PPARγ on its target genes in 3T3-L1 preadipocytes and diabetic primary adipocytes, depending on inducible nitric oxide synthase (iNOS). We further showed that PPARγ underwent S-nitrosylation in response to nitrosative stress. Mass-spectrometry and site-directed mutagenesis revealed that S-nitrosylation at cysteine 168 was responsible for the impairment of PPARγ function. Extended exposure to NO instigated the proteasome-dependent degradation of PPARγ. Consistently, in vivo evidence revealed an association of the decreased PPARγ protein level with increased macrophage infiltration in visceral adipose tissue (VAT) of obese diabetic db/db mice. Together, our results demonstrated that pro-inflammatory macrophages suppressed PPARγ activity in adipocytes via S-nitrosylation, suggesting a novel mechanism linking metabolic inflammation with insulin resistance.