Peripheral insulin resistance contributes to the development of type 2 diabetes. TCF7L2 has been tightly associated with this disease, although the exact mechanism was largely elusive. Here we propose a novel role of TCF7L2 in hepatic glucose metabolism in mammals. Expression of medium and short isoforms of TCF7L2 was greatly diminished in livers of diet-induced and genetic mouse models of insulin resistance, prompting us to delineate the functional role of these isoforms in hepatic glucose metabolism. Knockdown of hepatic TCF7L2 promoted increased blood glucose levels and glucose intolerance with increased gluconeogenic gene expression in wild-type mice, in accordance with the PCR array data showing that only the gluconeogenic pathway is specifically up-regulated upon depletion of hepatic TCF7L2. Conversely, overexpression of a nuclear isoform of TCF7L2 in high-fat diet-fed mice ameliorated hyperglycemia with improved glucose tolerance, suggesting a role of this factor in hepatic glucose metabolism. Indeed, we observed a binding of TCF7L2 to promoters of gluconeogenic genes; and expression of TCF7L2 inhibited adjacent promoter occupancies of CREB, CRTC2, and FoxO1, critical transcriptional modules in hepatic gluconeogenesis, to disrupt target gene transcription. Finally, haploinsufficiency of TCF7L2 in mice displayed higher glucose levels and impaired glucose tolerance, which were rescued by hepatic expression of a nuclear isoform of TCF7L2 at the physiological level. Collectively, these data suggest a crucial role of TCF7L2 in hepatic glucose metabolism; reduced hepatic expression of nuclear isoforms of this factor might be a critical instigator of hyperglycemia in type 2 diabetes.