The oxysterol receptors LXR (liver X receptor)-alpha and LXRbeta are nuclear receptors that play a key role in regulation of cholesterol and fatty acid metabolism. We found that LXRs also play a significant role in glucose metabolism. Treatment of diabetic rodents with the LXR agonist, T0901317, resulted in dramatic reduction of plasma glucose. In insulin-resistant Zucker (fa/fa) rats, T0901317 significantly improved insulin sensitivity. Activation of LXR did not induce robust adipogenesis but rather inhibited the expression of several genes involved in hepatic gluconeogenesis, including phosphoenolpyruvate carboxykinase (PEPCK). Hepatic glucose output was dramatically reduced as a result of this regulation. Nuclear run-on studies indicated that transcriptional repression was primarily responsible for the inhibition of PEPCK by the LXR agonist. In addition, we show that the regulation of the liver gluconeogenic pathway by LXR agonists was a direct effect on hepatocytes. These data not only suggest that LXRs are novel targets for diabetes but also reveal an unanticipated role for these receptors, further linking lipid and glucose metabolism.