Insulin resistance and elevated glucagon levels result in nonsuppressible hepatic glucose production and hyperglycemia in patients with type 2 diabetes. The CREB coactivator complex controls transcription of hepatic gluconeogenic enzyme genes. Here, we show that both the antidiabetic agent metformin and insulin phosphorylate the transcriptional coactivator CREB binding protein (CBP) at serine 436 via PKC iota/lambda. This event triggers the dissociation of the CREB-CBP-TORC2 transcription complex and reduces gluconeogenic enzyme gene expression. Mice carrying a germline mutation of this CBP phosphorylation site (S436A) demonstrate resistance to the hypoglycemic effect of both insulin and metformin. Obese, hyperglycemic mice display hepatic insulin resistance, but metformin is still effective in treating the hyperglycemia of these mice since it stimulates CBP phosphorylation by bypassing the block in insulin signaling. Our findings point to CBP phosphorylation at Ser436 by metformin as critical for its therapeutic effect, and as a potential target for pharmaceutical intervention.