Obesity is a major risk factor for insulin resistance; however, the factors linking these disorders are not well defined. Herein, we show that the noninhibitory serine protease inhibitor, pigment epithelium-derived factor (PEDF), plays a causal role in insulin resistance. Adipocyte PEDF expression and serum levels are elevated in several rodent models of obesity and reduced upon weight loss and insulin sensitization. Lean mice injected with recombinant PEDF exhibited reduced insulin sensitivity during hyperinsulinemic-euglycemic clamps. Acute PEDF administration activated the proinflammatory serine/threonine kinases c-Jun terminal kinase and extracellular regulated kinase in both muscle and liver, which corresponded with reduced insulin signal transduction. Prolonged PEDF administration stimulated adipose tissue lipolysis, resulted in ectopic lipid deposition, and reduced insulin sensitivity, while neutralizing PEDF in obese mice enhanced insulin sensitivity. Overall, these results identify a causal role for PEDF in obesity-induced insulin resistance.