Insulin receptor substrate (IRS)-2(-/-) mice develop diabetes because of insulin resistance in the liver and failure to undergo beta-cell hyperplasia. Here we show by DNA chip microarray analysis that expression of the sterol regulatory element-binding protein (SREBP)-1 gene, a downstream target of insulin, was paradoxically increased in 16-week-old IRS-2(-/-) mouse liver, where insulin-mediated intracellular signaling events were substantially attenuated. The expression of SREBP-1 downstream genes, such as the spot 14, ATP citrate-lyase, and fatty acid synthase genes, was also increased. Increased liver triglyceride content in IRS-2(-/-) mice assures the physiological importance of SREBP-1 gene induction. IRS-2(-/-) mice showed leptin resistance; low dose leptin administration, enough to reduce food intake and body weight in wild-type mice, failed to do so in IRS-2(-/-) mice. Interestingly, high dose leptin administration reduced SREBP-1 expression in IRS-2(-/-) mouse liver. Thus, IRS-2 gene disruption results in leptin resistance, causing an SREBP-1 gene induction, obesity, fatty liver, and diabetes.