The transcription factor FOXO1 plays a central role in metabolic homeostasis by regulating leptin and insulin activity in many cell types, including neurons. However, the neurons mediating these effects and the identity of the molecular targets through which FOXO1 regulates metabolism remain to be defined. Here, we show that the ventral medial nucleus of the hypothalamus (VMH) is a key site of FOXO1 action. We found that mice lacking FOXO1 in steroidogenic factor 1 (SF-1) neurons of the VMH are lean due to increased energy expenditure. The mice also failed to appropriately suppress energy expenditure in response to fasting. Furthermore, these mice displayed improved glucose tolerance due to increased insulin sensitivity in skeletal muscle and heart. Gene expression profiling and sequence analysis revealed several pathways regulated by FOXO1. In addition, we identified the nuclear receptor SF-1 as a direct FOXO1 transcriptional target in the VMH. Collectively, our data suggest that the transcriptional networks modulated by FOXO1 in VMH neurons are key components in the regulation of energy balance and glucose homeostasis.