Insulin resistance, obesity, diabetes, dyslipidemia and nonalcoholic fatty liver are components of the metabolic syndrome, a disease complex that is increasing at epidemic rates in westernized countries. Although proinflammatory cytokines have been suggested to contribute to the development of these disorders, the molecular mechanism of the development of this syndrome is poorly understood. In this study, we show that expression of suppressor of cytokine signaling SOCS-1 and SOCS-3 is increased in livers of obese insulin-resistant animals, and that adenoviral-mediated overexpression of SOCS-1 or SOCS-3 in liver causes insulin resistance through down-regulation of tyrosine phosphorylation of insulin receptor substrate (IRS) proteins. Moreover, the increased SOCS-1 and SOCS-3 also cause a prominent up-regulation of the key regulator of fatty acid synthesis in liver, sterol regulatory element binding protein (SREBP)-1. Conversely, inhibition of SOCS-1 and SOCS-3 in livers of obese diabetic db/db mice by antisense treatment modestly improves insulin sensitivity, but completely normalizes the increased expression of SREBP-1. The latter leads to dramatic amelioration of hepatic steatosis and hypertriglyceridemia. Promoter activity analysis reveals that expression of SOCS-1 or SOCS-3 with SOCS-3 being more potent enhances SREBP-1c expression, while it is inhibited by expression of STAT3. This STAT3-mediated inhibition of SREBP-1c expression is antagonized by co-expression of SOCS proteins. Moreover, db/db mice display decreased STAT3 phosphorylation in liver that is normalized by antisense treatment of SOCS proteins. These data suggest that obese subjects in the persistent inflammatory states, such as elevated circulating tumor necrosis factor-alpha, may have down-regulated STAT3-mediated signaling by increased SOCS proteins, leading to up-regulation of SREBP-1c expression and increased fatty acid synthesis in liver. Thus, SOCS proteins play an important role in pathogenesis of the metabolic syndrome by concordantly modulating cytokine signaling and insulin signaling.