Lipid infusion or ingestion of a high-fat diet results in insulin resistance, but the mechanism underlying this phenomenon remains unclear. Here we show that, in rats fed a high-fat diet, whole-animal, muscle and liver insulin resistance is ameliorated following hepatic overexpression of malonyl-coenzyme A (CoA) decarboxylase (MCD), an enzyme that affects lipid partitioning. MCD overexpression decreased circulating free fatty acid (FFA) and liver triglyceride content. In skeletal muscle, levels of triglyceride and long-chain acyl-CoA (LC-CoA)-two candidate mediators of insulin resistance-were either increased or unchanged. Metabolic profiling of 36 acylcarnitine species by tandem mass spectrometry revealed a unique decrease in the concentration of one lipid-derived metabolite, beta-OH-butyrate, in muscle of MCD-overexpressing animals. The best explanation for our findings is that hepatic expression of MCD lowered circulating FFA levels, which led to lowering of muscle beta-OH-butyrate levels and improvement of insulin sensitivity.