Insulin resistance and β cell toxicity are key features of type 2 diabetes. One leading hypothesis suggests that these abnormalities result from excessive flux of nutrients through the UDP–hexosamine biosynthetic pathway leading to “glucose toxicity.” How the products of the hexosamine pathway mediate these effects is not known. Here, we show that transgenic overexpression of an enzyme using UDP-GlcNAc to modify proteins with O-GlcNAc produces the type 2 diabetic phenotype. Even modest overexpression of an isoform of O-GlcNAc transferase, in muscle and fat, leads to insulin resistance and hyperleptinemia. These data support the proposal that O-linked GlcNAc transferase participates in a hexosamine-dependent signaling pathway that is linked to insulin resistance and leptin production.