We previously showed that adipose differentiation related protein (Adfp)-deficient mice display a 60% reduction in hepatic triglyceride (TG) content. In this study, we investigated the role of ADFP in lipid and glucose homeostasis in a genetic obesity model, Lep(ob/ob) mice. We bred Adfp(-/-) mice with Lep(ob/ob) mice to create Lep(ob/ob)/Adfp(-/-) and Lep(ob/ob)/Adfp(+/+) mice and analyzed the hepatic lipids, lipid droplet (LD) morphology, LD protein composition and distribution, lipogenic gene expression, and VLDL secretion, as well as insulin sensitivity of the two groups of mice. Compared with Lep(ob/ob)/Adfp(+/+) mice, Lep(ob/ob)/Adfp(-/-) mice displayed an increased VLDL secretion rate, a 25% reduction in hepatic TG associated with improvement in fatty liver grossly and microscopically with a change of the size of LDs in a proportion of the hepatocytes and a redistribution of major LD-associated proteins from the cytoplasmic compartment to the LD surface. There was no detectable change in lipogenic gene expression. Lep(ob/ob)/Adfp(-/-) mice also had improved glucose tolerance and insulin sensitivity in both liver and muscle. The alteration of LD size in the liver of Lep(ob/ob)/Adfp(-/-) mice despite the relocation of other LDPs to the LD indicates a nonredundant role for ADFP in determining the size and distribution of hepatic LDs.