Here we investigated the biological functions of adiponectin/ACRP30, a fat-derived hormone, by disrupting the gene that encodes it in mice. Adiponectin/ACRP30-knockout (KO) mice showed delayed clearance of free fatty acid in plasma, low levels of fatty-acid transport protein 1 (FATP-1) mRNA in muscle, high levels of tumor necrosis factor-alpha (TNF-alpha) mRNA in adipose tissue and high plasma TNF-alpha concentrations. The KO mice exhibited severe diet-induced insulin resistance with reduced insulin-receptor substrate 1 (IRS-1)-associated phosphatidylinositol 3 kinase (PI3-kinase) activity in muscle. Viral mediated adiponectin/ACRP30 expression in KO mice reversed the reduction of FATP-1 mRNA, the increase of adipose TNF-alpha mRNA and the diet-induced insulin resistance. In cultured myocytes, TNF-alpha decreased FATP-1 mRNA, IRS-1-associated PI3-kinase activity and glucose uptake, whereas adiponectin increased these parameters. Our results indicate that adiponectin/ACRP30 deficiency and high TNF-alpha levels in KO mice reduced muscle FATP-1 mRNA and IRS-1-mediated insulin signaling, resulting in severe diet-induced insulin resistance.