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Current peroxisome proliferator-activated receptor (PPAR)-targeted drugs, such as the PPARγ-directed diabetes drug rosiglitazone, are associated with undesirable side effects due to robust agonist activity in non-target tissues. To find new PPAR ligands with fewer toxic effects, we generated transgenic zebrafish that can be screened in high throughput for new tissue-selective PPAR partial agonists. A structural analog of coenzyme Q10 (idebenone) that elicits spatially restricted partial agonist activity for both PPARα and PPARγ was identified. Coenzyme Q10 was also found to bind and activate both PPARs in a similar fashion, suggesting an endogenous role in relaying the states of mitochondria, peroxisomes and cellular redox to the two receptors. Testing idebenone in a mouse model of type 2 diabetes revealed the ability to reverse fatty liver development. These findings indicate new mechanisms of action for both PPARα and PPARγ, and new potential treatment options for nonalcoholic fatty liver disease (NAFLD) and steatosis. This article has an associated First Person interview with the first author of the paper., Summary: A zebrafish screen identifies a novel PPARα/γ ligand, idebenone, with potential for treatment of fatty liver diseases, as seen by testing it in a mouse model of type 2 diabetes.