Central leptin action rescues type 1 diabetic (T1D) hyperglycemia; however, the underlying mechanism and the identity of mediating neurons remain elusive. Here, we show that leptin receptor (LepR)-expressing neurons in arcuate (LepRArc) are selectively activated in T1D. Activation of LepRArc neurons, Arc GABAergic (GABAArc) neurons, or arcuate AgRP neurons, is able to reverse the leptin's rescuing effect. Conversely, inhibition of GABAArc neurons, but not AgRP neurons, produces leptin-mimicking rescuing effects. Further, AgRP neuron function is not required for T1D hyperglycemia or leptin's rescuing effects. Finally, T1D LepRArc neurons show defective nutrient sensing and signs of cellular energy deprivation, which are both restored by leptin, whereas nutrient deprivation reverses the leptin action. Our results identify aberrant activation of LepRArc neurons owing to energy deprivation as the neural basis for T1D hyperglycemia and that leptin action is mediated by inhibiting LepRArc neurons through reversing energy deprivation.