Ghrelin and leptin are suggested to regulate energy homeostasis as mutual antagonists on hypothalamic neurons that regulate feeding behavior. We employed reverse genetics to investigate the interplay between ghrelin and leptin. Leptin-deficient mice (ob/ob) are hyperphagic, obese, and hyperglycemic. Unexpectedly, ablation of ghrelin in ob/ob mice fails to rescue the obese hyperphagic phenotype, indicating that the ob/ob phenotype is not a consequence of ghrelin unopposed by leptin. Remarkably, deletion of ghrelin augments insulin secretion in response to glucose challenge and increases peripheral insulin sensitivity; indeed, the hyperglycemia exhibited by ob/ob mice is markedly reduced when ob/ob mice are bred onto the ghrelin(-/-) background. We further demonstrate that ablation of ghrelin reduces expression of Ucp2 mRNA in the pancreas, which contributes toward enhanced glucose-induced insulin secretion. Hence, chronically, ghrelin controls glucose homeostasis by regulating pancreatic Ucp2 expression and insulin sensitivity.