GdCl3 (gadolinium chloride) has been shown to reduce blood glucose; however, the underlying mechanism remains unclear. Liver gluconeogenesis is an important pathway involved in the maintenance of glucose homoeostasis. The aim of the present study was to investigate the role of GdCl3 in hepatic gluconeogenesis and explore the precise molecular mechanism. Animals from a classical Type 2 diabetic mouse model, created by exposing C57BL/6J mice to a high-fat diet for 4 months, were treated with GdCl3 or saline. Body weight, blood glucose and insulin sensitivity were monitored. It was observed that GdCl3 significantly reduced blood glucose levels and improved insulin sensitivity. A pyruvate tolerance test showed further that GdCl3 suppressed gluconeogenesis in diabetic mice. In the livers of GdCl3-treated mice, the expression of Pepck (phosphoenolpyruvate carboxykinase) and G6pase (glucose-6-phosphatase), the key enzymes in gluconeogenesis, were dramatically reduced. Furthermore, experiments in hepatocarcinoma cells revealed that GdCl3 activated the Akt pathway to promote the phosphorylation of FoxO1 (forkhead box O1), leading to the suppression of gluconeogenesis by reducing the expression of PEPCK and G6Pase and resulting in decreased cellular production of glucose. Comparable results were observed in the livers of GdCl3-treated mice. In addition, we have shown that GdCl3 augmented the role of insulin to control hepatic glucose production. We conclude that GdCl3 reduces hyperglycaemia via the Akt/FoxO1-induced suppression of hepatic gluconeogenesis, both in Type 2 diabetic mice (in vivo) and in hepatocarcinoma cells (in vitro), suggesting that GdCl3 may be a potential therapeutic agent for diabetes.