In mice with too little fat (lipodystrophy) or too much fat (ob/ob), leptin deficiency leads to hyperglycemia, hyperinsulinemia, and insulin resistance. In both disorders, the liver overproduces glucose as a result of resistance to the normal action of insulin in repressing mRNAs for gluconeogenic enzymes. Here we show that chronic hyperinsulinemia downregulates the mRNA for IRS-2, an essential component of the insulin-signaling pathway in liver, thereby producing insulin resistance. Despite IRS-2 deficiency, insulin continues to stimulate production of SREBP-1c, a transcription factor that activates fatty acid synthesis. The combination of insulin resistance (inappropriate gluconeogenesis) and insulin sensitivity (elevated lipogenesis) establishes a vicious cycle that aggravates hyperinsulinemia and insulin resistance in lipodystrophic and ob/ob mice.