The prevalence of type 2 diabetes is rapidly increasing, with severe socioeconomic impacts. Excess lipid deposition in peripheral tissues impairs insulin sensitivity and glucose uptake, and has been proposed to contribute to the pathology of type 2 diabetes. However, few treatment options exist that directly target ectopic lipid accumulation. Recently it was found that vascular endothelial growth factor B (VEGF-B) controls endothelial uptake and transport of fatty acids in heart and skeletal muscle. Here we show that decreased VEGF-B signalling in rodent models of type 2 diabetes restores insulin sensitivity and improves glucose tolerance. Genetic deletion of Vegfb in diabetic db/db mice prevented ectopic lipid deposition, increased muscle glucose uptake and maintained normoglycaemia. Pharmacological inhibition of VEGF-B signalling by antibody administration to db/db mice enhanced glucose tolerance, preserved pancreatic islet architecture, improved β-cell function and ameliorated dyslipidaemia, key elements of type 2 diabetes and the metabolic syndrome. The potential use of VEGF-B neutralization in type 2 diabetes was further elucidated in rats fed a high-fat diet, in which it normalized insulin sensitivity and increased glucose uptake in skeletal muscle and heart. Our results demonstrate that the vascular endothelium can function as an efficient barrier to excess muscle lipid uptake even under conditions of severe obesity and type 2 diabetes, and that this barrier can be maintained by inhibition of VEGF-B signalling. We propose VEGF-B antagonism as a novel pharmacological approach for type 2 diabetes, targeting the lipid-transport properties of the endothelium to improve muscle insulin sensitivity and glucose disposal.