Background & Aims: PTEN is a dual lipid/protein phosphatase, downregulated in steatotic livers with obesity or HCV infection. Liver-specific PTEN knockout (LPTEN KO) mice develop steatosis, inflammation/fibrosis and hepatocellular carcinoma with aging, but surprisingly also enhanced glucose tolerance. This study aimed at understanding the mechanisms by which hepatic PTEN deficiency improves glucose tolerance, while promoting fatty liver diseases. Methods: Control and LPTEN KO mice underwent glucose/pyruvate tolerance tests and euglycemic-hyperinsulinemic clamps. Body fat distribution was assessed by EchoMRI, CT-scan and dissection analyses. Primary/cultured hepatocytes and insulin-sensitive tissues were analysed ex vivo. Results: PTEN deficiency in hepatocytes led to steatosis through increased fatty acid (FA) uptake and de novo lipogenesis. Although LPTEN KO mice exhibited hepatic steatosis, they displayed increased skeletal muscle insulin sensitivity and glucose uptake, as assessed by euglycemic-hyperinsulinemic clamps. Surprisingly, white adipose tissue (WAT) depots were also drastically reduced. Analyses of key enzymes involved in lipid metabolism further indicated that FA synthesis/esterification was decreased in WAT. In addition, Ucp1 expression and multilocular lipid droplet structures were observed in this tissue, indicating the presence of beige adipocytes. Consistent with a liver to muscle/ adipocyte crosstalk, the expression of liver-derived circulating factors, known to impact on muscle insulin sensitivity and WAT homeostasis (e.g. FGF21), was modulated in LPTEN KO mice.