Insulin resistance, a hallmark of type 2 diabetes and obesity, is associated with increased activity of MAP and stress-activated protein (SAP) kinases, which results in decreased insulin signaling. Our goal was to investigate the role of MAP kinase phosphatase-4 (MKP-4) in modulating this process. We found that MKP-4 expression is up-regulated during adipocyte and myocyte differentiation in vitro and up-regulated during fasting in white adipose tissue in vivo. Overexpression of MKP-4 in 3T3-L1 cells inhibited ERK and JNK phosphorylation and, to a lesser extent, p38MAPK phosphorylation. As a result, the phosphorylation of IRS-1 serine 307 induced by anisomycin was abolished, leading to a sensitization of insulin signaling with recovery of insulin-stimulated IRS-1 tyrosine phosphorylation, IRS-1 docking with phosphatidylinositol 3-kinase, and Akt phosphorylation. MKP-4 also reversed the effect of TNF-alpha to inhibit insulin signaling; alter IL-6, Glut1 and Glut4 expression; and inhibit insulin-stimulated glucose uptake in 3T3-L1 adipocytes. Overexpression of MKP-4 in the liver of ob/ob mice decreased ERK and JNK phosphorylation, leading to a reduction in fed and fasted glycemia, improved glucose intolerance, decreased expression of gluconeogenic and lipogenic genes, and reduced hepatic steatosis. Thus, MKP-4 has a protective effect against the development of insulin resistance through its ability to dephosphorylate and inactivate crucial mediators of stress-induced insulin resistance, such as ERK and JNK, and increasing MKP-4 activity might provide a therapy for insulin-resistant disorders.