Hepatic insulin signalling involves insulin receptor substrates (Irs) 1/2, and is normally associated with the inhibition of gluconeogenesis and activation of lipogenesis. In diabetes and obesity, insulin no longer suppresses hepatic gluconeogenesis, while continuing to activate lipogenesis, a state referred to as 'selective insulin resistance'. Here, we show that 'selective insulin resistance' is caused by the differential expression of Irs1 and Irs2 in different zones of the liver. We demonstrate that hepatic Irs2-knockout mice develop 'selective insulin resistance', whereas mice lacking in Irs1, or both Irs1 and Irs2, develop 'total insulin resistance'. In obese diabetic mice, Irs1/2-mediated insulin signalling is impaired in the periportal zone, which is the primary site of gluconeogenesis, but enhanced in the perivenous zone, which is the primary site of lipogenesis. While hyperinsulinaemia reduces Irs2 expression in both the periportal and perivenous zones, Irs1 expression, which is predominantly in the perivenous zone, remains mostly unaffected. These data suggest that 'selective insulin resistance' is induced by the differential distribution, and alterations of hepatic Irs1 and Irs2 expression.