Obesity is the driving force behind the worldwide increase in the prevalence of type 2 diabetes mellitus. Hyperglycaemia is a hallmark of diabetes and is largely due to increased hepatic gluconeogenesis. The medial hypothalamus is a major integrator of nutritional and hormonal signals, which play pivotal roles not only in the regulation of energy balance but also in the modulation of liver glucose output. Bidirectional changes in hypothalamic insulin signalling therefore result in parallel changes in both energy balance and glucose metabolism. Here we show that activation of ATP-sensitive potassium (K(ATP)) channels in the mediobasal hypothalamus is sufficient to lower blood glucose levels through inhibition of hepatic gluconeogenesis. Finally, the infusion of a K(ATP) blocker within the mediobasal hypothalamus, or the surgical resection of the hepatic branch of the vagus nerve, negates the effects of central insulin and halves the effects of systemic insulin on hepatic glucose production. Consistent with these results, mice lacking the SUR1 subunit of the K(ATP) channel are resistant to the inhibitory action of insulin on gluconeogenesis. These findings suggest that activation of hypothalamic K(ATP) channels normally restrains hepatic gluconeogenesis, and that any alteration within this central nervous system/liver circuit can contribute to diabetic hyperglycaemia.