Obesity is associated with an enhanced inflammatory response that exacerbates insulin resistance and contributes to diabetes, atherosclerosis, and cardiovascular disease. One mechanism accounting for the increased inflammation associated with obesity is activation of the innate immune signaling pathway triggered by TLR4 recognition of saturated fatty acids, an event that is essential for lipid-induced insulin resistance. Using in vitro and in vivo systems to model lipid induction of TLR4-dependent inflammatory events in rodents, we show here that TLR4 is an upstream signaling component required for saturated fatty acid-induced ceramide biosynthesis. This increase in ceramide production was associated with the upregulation of genes driving ceramide biosynthesis, an event dependent of the activity of the proinflammatory kinase IKKβ. Importantly, increased ceramide production was not required for TLR4-dependent induction of inflammatory cytokines, but it was essential for TLR4-dependent insulin resistance. These findings suggest that sphingolipids such as ceramide might be key components of the signaling networks that link lipid-induced inflammatory pathways to the antagonism of insulin action that contributes to diabetes.