Approximately 35% of follicular thyroid carcinomas and a small fraction of follicular adenomas are associated with a t(2;3)(q13;p25) chromosomal translocation that fuses paired box gene 8 (PAX8) with the peroxisome proliferator-activated receptor-gamma gene (PPARG), resulting in expression of a PAX8-PPARgamma fusion protein, PPFP. The mechanism by which PPFP contributes to follicular thyroid neoplasia is poorly understood. Therefore, we have created mice with thyroid-specific expression of PPFP. At 1 yr of age, 25% of PPFP mice demonstrate mild thyroid hyperplasia. We bred these mice to mice with thyroid-specific single-allele deletion of the tumor suppressor Pten, denoted ThyPten(+/-). In humans, PTEN deletion is associated with follicular adenomas and carcinomas, and in mice, deletion of one Pten allele causes mild thyroid hyperplasia. We found that PPFP synergizes with ThyPten(+/-) to cause marked thyroid hyperplasia, but carcinomas were not observed. AKT phosphorylation was increased as expected in the ThyPten(+/-) thyroids, and also was increased in the PPFP thyroids and in human PPFP follicular cancers. Staining for the cell cycle marker Ki-67 was increased in the PPFP, ThyPten(+/-), and PPFP;ThyPten(+/-) thyroids compared with wild-type thyroids. Several genes with increased expression in PPFP cancers also were found to be increased in the thyroids of PPFP mice. This transgenic mouse model of thyroidal PPFP expression exhibits properties similar to those of PPFP thyroid cancers. However, the mice develop thyroid hyperplasia, not carcinoma, suggesting that additional events are required to cause follicular thyroid cancer.