The adipose tissue-derived hormone adiponectin improves insulin sensitivity and its circulating levels are decreased in obesity-induced insulin resistance. Here, we report the generation of a mouse line with a genomic disruption of the adiponectin locus. We aimed to identify whether these mice develop insulin resistance and which are the primary target tissues affected in this model. Using euglycemic/insulin clamp studies, we demonstrate that these mice display severe hepatic but not peripheral insulin resistance. Furthermore, we wanted to test whether the lack of adiponectin magnifies the impairments of glucose homeostasis in the context of a dietary challenge. When exposed to high fat diet, adiponectin null mice rapidly develop glucose intolerance. Specific PPARgamma agonists such as thiazolidinediones (TZDs) improve insulin sensitivity by mechanisms largely unknown. Circulating adiponectin levels are significantly up-regulated in vivo upon activation of PPARgamma. Both TZDs and adiponectin have been shown to activate AMP-activated protein kinase (AMPK) in the same target tissues. We wanted to address whether the ability of TZDs to improve glucose tolerance is dependent on adiponectin and whether this improvement involved AMPK activation. We demonstrate that the ability of PPARgamma agonists to improve glucose tolerance in ob/ob mice lacking adiponectin is diminished. Adiponectin is required for the activation of AMPK upon TZD administration in both liver and muscle. In summary, adiponectin is an important contributor to PPARgamma-mediated improvements in glucose tolerance through mechanisms that involve the activation of the AMPK pathway.