Macrophage infiltration and activation in metabolic tissues underlie obesity-induced insulin resistance and type 2 diabetes. While inflammatory activation of resident hepatic macrophages potentiates insulin resistance, the functions of alternatively activated Kupffer cells in metabolic disease remain unknown. Here we show that in response to the Th2 cytokine interleukin-4 (IL-4), peroxisome proliferator-activated receptor delta (PPARdelta) directs expression of the alternative phenotype in Kupffer cells and adipose tissue macrophages of lean mice. However, adoptive transfer of PPARdelta(-/-) (Ppard(-/-)) bone marrow into wild-type mice diminishes alternative activation of hepatic macrophages, causing hepatic dysfunction and systemic insulin resistance. Suppression of hepatic oxidative metabolism is recapitulated by treatment of primary hepatocytes with conditioned medium from PPARdelta(-/-) macrophages, indicating direct involvement of Kupffer cells in liver lipid metabolism. Taken together, these data suggest an unexpected beneficial role for alternatively activated Kupffer cells in metabolic syndrome and type 2 diabetes.