Oxidative stress causes mitochondrial dysfunction and metabolic complications through unknown mechanisms. Cardiolipin (CL) is a key mitochondrial phospholipid required for oxidative phosphorylation. Oxidative damage to CL from pathological remodeling is implicated in the etiology of mitochondrial dysfunction commonly associated with diabetes, obesity, and other metabolic diseases. Here we show that ALCAT1, a lyso-CL acyltransferase up-regulated by oxidative stress and diet-induced obesity (DIO), catalyzes the synthesis of CL species which are highly sensitive to oxidative damage, leading to mitochondrial dysfunction, ROS production, and insulin resistance. These metabolic disorders were reminiscent of those observed in type 2 diabetes, and were reversed by rosiglitazone treatment. Consequently, ALCAT1 deficiency prevented the onset of DIO and significantly improved mitochondrial complex I activity, lipid oxidation, and insulin signaling in ALCAT1−/− mice. Collectively, these findings identify a key role of ALCAT1 in regulating CL remodeling, mitochondrial dysfunction, and susceptibility to DIO.