The role of the peroxisome proliferator-activated receptor-α (PPARα) in the development of insulin-resistant diabetes was evaluated using gain- and loss-of-function approaches. Transgenic mice overexpressing PPARα in muscle (MCK-PPARα mice) developed glucose intolerance despite being protected from diet-induced obesity. Conversely, PPARα null mice were protected from diet-induced insulin resistance in the context of obesity. In skeletal muscle, MCK-PPARα mice exhibited increased fatty acid oxidation rates, diminished AMP-activated protein kinase activity, and reduced insulin-stimulated glucose uptake without alterations in the phosphorylation status of key insulin-signaling proteins. These effects on muscle glucose uptake involved transcriptional repression of the GLUT4 gene. Pharmacologic inhibition of fatty acid oxidation or mitochondrial respiratory coupling prevented the effects of PPARα on GLUT4 expression and glucose homeostasis. These results identify PPARα-driven alterations in muscle fatty acid oxidation and energetics as a potential link between obesity and the development of glucose intolerance and insulin resistance.