Despite its position as the first-line drug for treatment of type 2 diabetes mellitus, the mechanisms underlying the plasma glucose level-lowering effects of metformin (1,1-dimethylbiguanide) still remain incompletely understood. Metformin is thought to exert its primary antidiabetic action through the suppression of hepatic glucose production. In addition, the discovery that metformin inhibits the mitochondrial respiratory chain complex 1 has placed energy metabolism and activation of AMP-activated protein kinase (AMPK) at the centre of its proposed mechanism of action. However, the role of AMPK has been challenged and might only account for indirect changes in hepatic insulin sensitivity. Various mechanisms involving alterations in cellular energy charge, AMP-mediated inhibition of adenylate cyclase or fructose-1,6-bisphosphatase 1 and modulation of the cellular redox state through direct inhibition of mitochondrial glycerol-3-phosphate dehydrogenase have been proposed for the acute inhibition of gluconeogenesis by metformin. Emerging evidence suggests that metformin could improve obesity-induced meta-inflammation via direct and indirect effects on tissue-resident immune cells in metabolic organs (that is, adipose tissue, the gastrointestinal tract and the liver). Furthermore, the gastrointestinal tract also has a major role in metformin action through modulation of glucose-lowering hormone glucagon-like peptide 1 and the intestinal bile acid pool and alterations in gut microbiota composition.