Type 2 diabetes is characterized by a progressive resistance of peripheral tissues to insulin. Recent data have established the lipid phosphatase SH2 domain-containing inositol phosphatase 2 (SHIP2) as a critical negative regulator of insulin signal transduction. Mutations in the SHIP2 gene are associated with type 2 diabetes. Here, we used hyperglycemic and hyperinsulinemic KKA y mice to gain insight into the signaling events and metabolic changes triggered by SHIP2 inhibition in vivo. Liver-specific expression of a dominant-negative SHIP2 mutant in KKA y mice increased basal and insulin-stimulated Akt phosphorylation. Protein levels of glucose-6-phosphatase and phosphoenolpyruvate carboxykinase were significantly reduced, and consequently the liver produced less glucose through gluconeogenesis. Furthermore, SHIP2 inhibition improved hepatic glycogen metabolism by modulating the phosphorylation states of glycogen phosphorylase and glycogen synthase, which ultimately increased hepatic glycogen content. Enhanced glucokinase and reduced pyruvate dehydrogenase kinase 4 expression, together with increased plasma triglycerides, indicate improved glycolysis. As a consequence of the insulin-mimetic effects on glycogen metabolism, gluconeogenesis, and glycolysis, the liverspecific inhibition of SHIP2 improved glucose tolerance and markedly reduced prandial blood glucose levels in KKA y mice. These results support the attractiveness of a specific inhibition of SHIP2 for the prevention and/or treatment of type 2 diabetes. Diabetes 56:2235-2241, 2007 A key event in insulin signal transduction is the increase in phosphatidylinositol-3,4,5-trisphosphate [PI(3,4,5)P 3 ], which recruits and activates downstream effectors at the plasma membrane (1). The lipid phosphatase SH2 domain-containing inositol phosphatase 2 (SHIP2) is expressed in insulin target tissues and dephosphorylates PI(3,4,5)P 3 at the D5 position (2,3). Activating mutations in the SHIP2 gene contribute to the genetic susceptibility to type 2 diabetes in humans (4). Mice lacking the SHIP2 gene (Inppl1 Ϫ/Ϫ mice) are viable and have normal glucose and insulin levels with normal insulin and glucose tolerances. However, Inppl1Ϫ/Ϫ mice are protected from diet-induced obesity, hyperglycemia, and insulin resistance (5). The function of SHIP2 in differentiated L6 myotubes and 3T3-L1 adipocytes was extensively studied by inhibition of the endogenous SHIP2 via overexpression of a dominantnegative SHIP2 mutant (dnSHIP2). SHIP2 inhibition increases phosphorylation of Akt (also known as protein kinase B) and glycogen synthesis in both cell lines (6,7). The liver-specific overexpression of dnSHIP2 in db/db mice results in dramatically decreased fasting glucose levels due to the reduced expression of the gluconeogenic genes glucose-6-phosphatase (G6Pase) and phosphoenolpyruvate carboxykinase (PEPCK) (8). However, the strong reduction in fasting blood glucose concentration confounds the interpretation of an improved glucose tolerance test in this model. Furthermore, an effect o...