Rapamycin and its derivatives are mTOR inhibitors used in tissue transplantation and cancer therapy. A percentage of patients treated with these inhibitors develop diabetic-like symptoms, but the molecular mechanisms are unknown. We show here that chronic rapamycin treatment in mice led to insulin resistance with suppression of insulin/IGF signaling and genes associated within this pathway, such as Igf1-2, Irs1-2, and Akt1-3. Importantly, skeletal muscle-specific YY1 knockout mice were protected from rapamycin-induced diabetic-like symptoms. This protection was caused by hyperactivation of insulin/IGF signaling with increased gene expression in this cascade that, in contrast to wild-type mice, was not suppressed by rapamycin. Mechanistically, rapamycin induced YY1 dephosphorylation and recruitment to promoters of insulin/IGF genes, which promoted interaction with the polycomb protein-2 corepressor. This was associated with H3K27 trimethylation leading to decreased gene expression and insulin signaling. These results have implications for rapamycin action in human diseases and biological processes such as longevity.