Txnip (thioredoxin-interacting protein) is a critical mediator of metabolism and adipogenesis in vivo. The mechanisms of action of Txnip are believed to operate at least in part by inhibiting the redox signaling functions of thioredoxin. We tested here whether Txnip suppressed adipogenesis by inhibiting thioredoxin and discovered a reversal of roles; Txnip inhibits adipogenesis directly, and thioredoxin binding regulates Txnip by enhancing Txnip protein stability. Unlike Txnip, a Txnip mutant that cannot bind thioredoxin (C247S) did not prevent adipocyte differentiation, but was degraded more quickly by proteasomal targeting. Finding that endogenous Txnip protein is also rapidly degraded at the onset of adipogenesis suggested that Txnip degradation is required for adipocyte differentiation. Thioredoxin overexpression stabilized Txnip protein levels to inhibit adipogenesis, and adipogenic stimulants such as insulin promoted Txnip-thioredoxin dissociation to the more labile free Txnip state. As an α-arrestin protein, Txnip has two C-terminal tail PPXY motifs that mediate E3 ubiquitin ligase binding and Txnip protein stability. Mutating the PPXY motifs prevented Txnip degradation, even when thioredoxin binding was lost, and restored the ability of C247S Txnip to inhibit adipogenesis. These studies present a novel reconsideration of Txnip-thioredoxin signaling by showing that thioredoxin regulates the intrinsic function of Txnip as an inhibitor of adipogenesis through protein stabilization.