Fasting triggers a series of hormonal cues that promote energy balance by inducing glucose output and lipid breakdown in the liver. In response to pancreatic glucagon and adrenal cortisol, the cAMP-responsive transcription factor CREB activates gluconeogenic and fatty acid oxidation programmes by stimulating expression of the nuclear hormone receptor coactivator PGC-1 (refs 2-5). In parallel, fasting also suppresses lipid storage and synthesis (lipogenic) pathways, but the underlying mechanism is unknown. Here we show that mice deficient in CREB activity have a fatty liver phenotype and display elevated expression of the nuclear hormone receptor PPAR-gamma, a key regulator of lipogenic genes. CREB inhibits hepatic PPAR-gamma expression in the fasted state by stimulating the expression of the Hairy Enhancer of Split (HES-1) gene, a transcriptional repressor that is shown here to be a mediator of fasting lipid metabolism in vivo. The coordinate induction of PGC-1 and repression of PPAR-gamma by CREB during fasting provides a molecular rationale for the antagonism between insulin and counter-regulatory hormones, and indicates a potential role for CREB antagonists as therapeutic agents in enhancing insulin sensitivity in the liver.