Bariatric surgery is the most effective treatment for type 2 diabetes and is associated with changes in gut metabolites. Previous work uncovered a gut-restricted TGR5 agonist with anti-diabetic properties-cholic acid-7-sulfate (CA7S)-that is elevated following sleeve gastrectomy (SG). Here, we elucidate a microbiome-dependent pathway by which SG increases CA7S production. We show that a microbial metabolite, lithocholic acid (LCA), is increased in murine portal veins post-SG and by activating the vitamin D receptor, induces hepatic mSult2A1/hSULT2A expression to drive CA7S production. An SG-induced shift in the microbiome increases gut expression of the bile acid transporters Asbt and Ostα, which in turn facilitate selective transport of LCA across the gut epithelium. Cecal microbiota transplant from SG animals is sufficient to recreate the pathway in germ-free (GF) animals. Activation of this gut-liver pathway leads to CA7S synthesis and GLP-1 secretion, causally connecting a microbial metabolite with the improvement of diabetic phenotypes.