PPARγ 3 is a target for insulin-sensitizing drugs such as glitazones, which improve plasma glucose maintenance in patients with diabetes. Synthetic ligands have been designed to mimic endogenous ligand binding to a canonical ligand-binding pocket to hyperactivate PPARγ 3. Here we reveal that synthetic PPARγ 3 ligands also bind to an alternate site, leading to unique receptor conformational changes that impact coregulator binding, transactivation and target gene expression. Using structure-function studies we show that alternate site binding occurs at pharmacologically relevant ligand concentrations, and is neither blocked by covalently bound synthetic antagonists nor by endogenous ligands indicating non-overlapping binding with the canonical pocket. Alternate site binding likely contributes to PPARγ 3 hyperactivation in vivo, perhaps explaining why PPARγ 3 full and partial or weak agonists display similar adverse effects. These findings expand our understanding of PPARγ 3 activation by ligands and suggest that allosteric modulators could be designed to fine tune PPARγ 3 activity without competing with endogenous ligands.