Increased adiposity confers risk for systemic insulin resistance and type 2 diabetes (T2D), but mechanisms underlying this pathogenic inter-organ crosstalk are incompletely understood. We find PHLPP2 (PH domain and leucine rich repeat protein phosphatase 2), recently identified as the Akt Ser473 phosphatase, to be increased in adipocytes from obese mice. To identify the functional consequence of increased adipocyte PHLPP2 in obese mice, we generated adipocyte-specific PHLPP2 knockout (A-PHLPP2) mice. A-PHLPP2 mice show normal adiposity and glucose metabolism when fed a normal chow diet, but reduced adiposity and improved whole-body glucose tolerance as compared to Cre- controls with high-fat diet (HFD) feeding. Notably, HFD-fed A-PHLPP2 mice show increased HSL phosphorylation, leading to increased lipolysis in vitro and in vivo. Mobilized adipocyte fatty acids are oxidized, leading to increased peroxisome proliferator-activated receptor alpha (PPARα)-dependent adiponectin secretion, which in turn increases hepatic fatty acid oxidation to ameliorate obesity-induced fatty liver. Consistently, adipose PHLPP2 expression is negatively correlated with serum adiponectin levels in obese humans. Overall, these data implicate an adipocyte PHLPP2-HSL-PPARα signaling axis to regulate systemic glucose and lipid homeostasis, and suggest that excess adipocyte PHLPP2 explains decreased adiponectin secretion and downstream metabolic consequence in obesity.