Pigment epithelium-derived factor (PEDF) is an endogenous antiangiogenic protein that also possesses antitumor activity. The mechanisms by which PEDF exerts its actions remains poorly understood. We sought to understand the role of PEDF in hepatocellular carcinoma (HCC), a hypervascular malignancy that has been shown to upregulate enzymes involved in fatty acid synthesis. PEDF expression occurs in two HCC cell lines and is oxygen dependent. Migration studies confirm PEDF's role as an endogenous inhibitor of angiogenesis in HCC cells. Loss of PEDF in an animal model leads to hepatocyte lipid accumulation, proliferation, and cellular atypia. To investigate potential interactions with transcription factors that are involved in fatty acid metabolism and cellular proliferation, we examined PEDF's interaction with PPARα in vitro and its functional activity through transactivation assays. We show that PEDF binds to PPARα but minimally to PPARγ. In the presence of the ligand, ciprofibrate, PEDF binding to PPARα decreases whereas the presence of troglitazone does not alter PEDF interactions with PPARγ. Transfection of the PEDF gene in the presence of the PPARα/RXR heterodimer demonstrates transcriptional activation of PPARα by PEDF. These data show that PEDF regulates lipid metabolism through activation of the transcription factor PPARα.