Fenretinide (FEN), a ligand of retinol binding protein 4 (RBP4), has been suggested as a measure to reduce insulin resistance and its associated disorders such as obesity, and fatty liver by reducing serum RBP4. We investigated whether there is another possible mechanism by which fenretinide reduces insulin resistance and fatty liver in genetically obese (ob/ob) mice. Male obese mice fed a high-fat diet (45% of calories from fat) were divided into two groups (n=13 each). One (FEN) received fenretinide (20 mg/kg body weight, intraperitoneally) and the other (O) received vehicle three times weekly for 24 d. C57BL/6J mice fed a normal-fat diet (16% of calories from fat) were used as a control (C; n=13). No changes in fat weight and serum leptin level could be observed in FEN mice. Lower plasma RBP4 was observed in FEN mice compared with O mice. Fenretinide improved whole-body insulin sensitivity based on glucose and insulin tolerance tests and the homeostasis model assessment of insulin resistance. Fenretinide decreased the plasma lipid (triglyceride, cholesterol, and free-fatty acid) levels, hepatic TG level, and histological steatosis score. The mechanism by which fenretinide prevents fatty liver may be explained by an increased plasma adiponectin level, increased activation of hepatic AMP-activated protein kinase, and the expression of peroxisome proliferator-activated protein-α and peroxisomal acyl-CoA oxidase, which promote fat oxidation. FEN alleviated insulin resistance and fatty liver in obese mice and thus may act as an anti-lipidemic and anti-diabetic drug.