Adipose tissue secretes proteins referred to as adipokines, many of which promote inflammation and disrupt glucose homeostasis. Here we show that secreted frizzled-related protein 5 (Sfrp5), a protein previously linked to the Wnt signaling pathway, is an anti-inflammatory adipokine whose expression is perturbed in models of obesity and type 2 diabetes. Sfrp5-deficient mice fed a high-calorie diet developed severe glucose intolerance and hepatic steatosis, and their adipose tissue showed an accumulation of activated macrophages that was associated with activation of the c-Jun N-terminal kinase signaling pathway. Adenovirus-mediated delivery of Sfrp5 to mouse models of obesity ameliorated glucose intolerance and hepatic steatosis. Thus, in the setting of obesity, Sfrp5 secretion by adipocytes exerts salutary effects on metabolic dysfunction by controlling inflammatory cells within adipose tissue.