Adiponectin is an adipocyte-derived hormone. Recent genome-wide scans have mapped a susceptibility locus for type 2 diabetes and metabolic syndrome to chromosome 3q27, where the gene encoding adiponectin is located. Here we show that decreased expression of adiponectin correlates with insulin resistance in mouse models of altered insulin sensitivity. Adiponectin decreases insulin resistance by decreasing triglyceride content in muscle and liver in obese mice. This effect results from increased expression of molecules involved in both fatty-acid combustion and energy dissipation in muscle. Moreover, insulin resistance in lipoatrophic mice was completely reversed by the combination of physiological doses of adiponectin and leptin, but only partially by either adiponectin or leptin alone. We conclude that decreased adiponectin is implicated in the development of insulin resistance in mouse models of both obesity and lipoatrophy. These data also indicate that the replenishment of adiponectin might provide a novel treatment modality for insulin resistance and type 2 diabetes.