Cellular cholesterol balance induces changes in the inflammatory status of macrophages, and low grade chronic inflammation is increasingly being recognized as one of the key steps in the development of atherosclerosis as well as insulin resistance. Cholesteryl ester hydrolase (CEH) catalyzes the hydrolysis of intracellular stored cholesteryl esters (CEs) and thereby enhances free cholesterol efflux and reduces cellular CE content. We have earlier reported reduced atherosclerosis and lesion necrosis in macrophage-specific CEH transgenic mice on a Ldlr(-/-) background. In the present study, we tested the hypothesis that reduced intracellular accumulation of CE in macrophages from CEH transgenic mice will attenuate expression of proinflammatory mediators, thereby reducing infiltration into adipose tissue, alleviating inflammation, and resulting in improved insulin sensitivity. Western diet fed Ldlr(-/-)CEH transgenic mice showed improved insulin sensitivity as assessed by glucose and insulin tolerance tests. Macrophages from CEH transgenic mice expressed significantly lower levels of proinflammatory cytokines (interleukin-1beta and interleukin-6) and chemokine (MCP-1; monocyte chemoattractant protein). Attenuation of NF-kappaB- and AP-1-driven gene expression was determined to be the underlying mechanism. Infiltration of macrophages into the adipose tissue that increases inflammation and impairs insulin signaling was also significantly reduced in Ldlr(-/-)CEH transgenic mice. In the OP-9 adipocyte peritoneal macrophage co-culture system, macrophages from CEH transgenic mice had a significantly reduced effect on insulin signaling as measured by Akt phosphorylation compared with nontransgenic macrophages. Taken together, these studies demonstrate that macrophage-specific overexpression of CEH decreases expression of proinflammatory mediators and attenuates macrophage infiltration into the adipose tissue, resulting in decreased circulating cytokines and improved insulin sensitivity.