Liver X receptor (LXR) agonists have been proposed to act as anti-diabetic drugs. However, pharmacological LXR activation leads to severe hepatic steatosis, a condition usually associated with insulin resistance and type 2 diabetes mellitus. To address this apparent contradiction, lean and ob/ob mice were treated with the LXR agonist GW-3965 for 10 days. Insulin sensitivity was assessed by hyperinsulinemic-euglycemic clamp studies. Hepatic glucose production (HGP) and metabolic clearance rate (MCR) of glucose were determined with stable isotope techniques. Blood glucose and hepatic and whole body insulin sensitivity remained unaffected upon treatment in lean mice, despite increased hepatic triglyceride contents (61.7 ± 7.2 vs. 12.1 ± 2.0 nmol/mg liver, P < 0.05). In ob/ob mice, LXR activation resulted in lower blood glucose levels and significantly improved whole body insulin sensitivity. GW-3965 treatment did not affect HGP under normo- and hyperinsulinemic conditions, despite increased hepatic triglyceride contents (221 ± 13 vs. 176 ± 19 nmol/mg liver, P < 0.05). Clamped MCR increased upon GW-3965 treatment (18.2 ± 1.0 vs. 14.3 ± 1.4 ml·kg⁻¹·min⁻¹, P = 0.05). LXR activation increased white adipose tissue mRNA levels of Glut4, Acc1 and Fasin ob/ob mice only. In conclusion, LXR-induced blood glucose lowering in ob/ob mice was attributable to increased peripheral glucose uptake and metabolism, physiologically reflected in a slightly improved insulin sensitivity. Remarkably, steatosis associated with LXR activation did not affect hepatic insulin sensitivity.