The peroxisome proliferator activated receptor gamma (PPARG) nuclear receptor regulates energy metabolism and insulin sensitivity. In this study, we present novel evidence for an essential role of PPARG in the regulation of osteocyte function, and support for the emerging concept of the conjunction between regulation of energy metabolism and bone mass. We report that PPARG is essential for sclerostin production, a recently approved target to treat osteoporosis. Our mouse model of osteocyte-specific PPARG deletion (Dmp1^CrePparγ^flfl or γOT^KO) is characterized with increased bone mass and reduced bone marrow adiposity, which is consistent with upregulation of WNT signaling and increased bone forming activity of endosteal osteoblasts. An analysis of osteocytes derived from γOT^KO and control mice showed an excellent correlation between PPARG and SOST/sclerostin at the transcript and protein levels. The 8 kb sequence upstream of Sost gene transcription start site possesses multiple PPARG binding elements (PPREs) with at least two of them binding PPARG with dynamics reflecting its activation with full agonist rosiglitazone and correlating with increased levels of Sost transcript and sclerostin protein expression (Pearson's r = 0.991, p = 0.001). Older γOT^KO female mice are largely protected from TZD-induced bone loss providing proof of concept that PPARG in osteocytes can be pharmacologically targeted. These findings demonstrate that transcriptional activities of PPARG are essential for sclerostin expression in osteocytes and support consideration of targeting PPARG activities with selective modulators to treat osteoporosis.