Leptin has been shown to reduce hyperglycemia in rodent models of type 1 diabetes. We investigated the effects of leptin administration in University of California, Davis, type 2 diabetes mellitus (UCD-T2DM) rats, which develop adult-onset polygenic obesity and type 2 diabetes. Animals that had been diabetic for 2 mo were treated with s.c. injections of saline (control) or murine leptin (0.5 mg/kg) twice daily for 1 mo. Control rats were pair-fed to leptin-treated animals. Treatment with leptin normalized fasting plasma glucose and was accompanied by lowered HbA1c, plasma glucagon, and triglyceride concentrations and expression of hepatic gluconeogenic enzymes compared with vehicle (P < 0.05), independent of any effects on body weight and food intake. In addition, leptin-treated animals exhibited marked improvement of insulin sensitivity and glucose homeostasis compared with controls, whereas pancreatic insulin content was 50% higher in leptin-treated animals (P < 0.05). These effects coincided with activation of leptin and insulin signaling pathways and down-regulation of the PKR-like endoplasmic reticulum (ER) kinase/eukaryotic translation inhibition factor 2α (PERK-eIF2α) arm of ER stress in liver, skeletal muscle, and adipose tissue as well as increased pro-opiomelanocortin and decreased agouti-related peptide in the hypothalamus. In contrast, several markers of inflammation/immune function were elevated with leptin treatment in the same tissues (P < 0.05), suggesting that the leptin-mediated increase of insulin sensitivity was not attributable to decreased inflammation. Thus, leptin administration improves insulin sensitivity and normalizes fasting plasma glucose in diabetic UCD-T2DM rats, independent of energy intake, via peripheral and possibly centrally mediated actions, in part by decreasing circulating glucagon and ER stress.