To determine the role of adipocytes and the tissue-specific nature in the insulin sensitizing action of rosiglitazone, we examined the effects of 3 weeks of rosiglitazone treatment on insulin signaling and action during hyperinsulinemic-euglycemic clamps in awake A-ZIP/F-1 (fatless), fat-transplanted fatless, and wild-type littermate mice. We found that 53 and 66% decreases in insulin-stimulated glucose uptake and insulin receptor substrate (IRS)-1-associated phosphatidylinositol (PI) 3-kinase activity in skeletal muscle of fatless mice were normalized after rosiglitazone treatment. These effects of rosiglitazone treatment were associated with 50% decreases in triglyceride and fatty acyl-CoA contents in the skeletal muscle of rosiglitazone-treated fatless mice. In contrast, rosiglitazone treatment exacerbated hepatic insulin resistance in the fatless mice and did not affect already reduced IRS-2-associated PI 3-kinase activity in liver. The worsening of insulin action in liver was associated with 30% increases in triglyceride and fatty acyl-CoA contents in the liver of rosiglitazone-treated fatless mice. In conclusion, these data support the hypothesis that rosiglitazone treatment enhanced insulin action in skeletal muscle mostly by its ability to repartition fat away from skeletal muscle.