Liver X receptors (LXRs) regulate lipogenesis and inflammation, but their contribution to the metabolic syndrome is unclear. We show that LXRs modulate key aspects of the metabolic syndrome in mice. LXRαβ-deficient-ob/ob (LOKO) mice remain obese but show reduced hepatic steatosis and improved insulin sensitivity compared to ob/ob mice. Impaired hepatic lipogenesis in LOKO mice is accompanied by reciprocal increases in adipose lipid storage, reflecting tissue-selective effects on the SREBP, PPARγ, and ChREBP lipogenic pathways. LXRs are essential for obesity-driven SREBP-1c and ChREBP activity in liver, but not fat. Furthermore, loss of LXRs in obesity promotes adipose PPARγ and ChREBP-β activity, leading to improved insulin sensitivity. LOKO mice also exhibit defects in β cell mass and proliferation despite improved insulin sensitivity. Our data suggest that sterol sensing by LXRs in obesity is critically linked with lipid and glucose homeostasis and provide insight into the complex relationships between LXR and insulin signaling.