Type 2 diabetes is characterized by insulin resistance and mitochondrial dysfunction in classical target tissues such as muscle, fat, and liver. Using a murine model of type 2 diabetes, we show that there is hypothalamic insulin resistance and mitochondrial dysfunction due to downregulation of the mitochondrial chaperone HSP60. HSP60 reduction in obese, diabetic mice was due to a lack of proper leptin signaling and was restored by leptin treatment. Knockdown of Hsp60 in a mouse hypothalamic cell line mimicked the mitochondrial dysfunction observed in diabetic mice and resulted in increased ROS production and insulin resistance, a phenotype that was reversed with antioxidant treatment. Mice with a heterozygous deletion of Hsp60 exhibited mitochondrial dysfunction and hypothalamic insulin resistance. Targeted acute downregulation of Hsp60 in the hypothalamus also induced insulin resistance, indicating that mitochondrial dysfunction can cause insulin resistance in the hypothalamus. Importantly, type 2 diabetic patients exhibited decreased expression of HSP60 in the brain, indicating that this mechanism is relevant to human disease. These data indicate that leptin plays an important role in mitochondrial function and insulin sensitivity in the hypothalamus by regulating HSP60. Moreover, leptin/insulin crosstalk in the hypothalamus impacts energy homeostasis in obesity and insulin-resistant states.