Early intensive insulin therapy improves insulin sensitivity in type 2 diabetic patients; while the underlying mechanism remains largely unknown. Pigment epithelium-derived factor (PEDF), an anti-angiogenic factor, is believed to be involved in the pathogenesis of insulin resistance. Here, we hypothesize that PEDF might be down regulated by insulin and then lead to the improved insulin resistance in type 2 diabetic patients during insulin therapy. We addressed this issue by investigating insulin regulation of PEDF expression in diabetic conditions. The results showed that serum PEDF was reduced by 15% in newly diagnosed type 2 diabetic patients after insulin therapy. In adipose tissue of diabetic Sprague-Dawley rats, PEDF expression was associated with TNF-α elevation and it could be decreased both in serum and in adipose tissue by insulin treatment. In adipocytes, PEDF was induced by TNF-α through activation of NF-κB. The response was inhibited by knockdown and enhanced by over expression of NF-κB p65. However, PEDF expression was indirectly, not directly, induced by NF-κB which promoted 11β-hydroxysteroid dehydrogenase 1 (11β-HSD1) expression in adipocytes. 11β-HSD1 is likely to stimulate PEDF expression through production of active form of glucocorticoids as dexamethasone induced PEDF expression in adipose tissue. Insulin inhibited PEDF by down-regulating 11β-HSD1 expression. The results suggest that PEDF activity is induced by inflammation and decreased by insulin through targeting 11β-HSD1/glucocorticoid pathway in adipose tissue of diabetic patients.