Liver fatty acid–binding protein (L‐Fabp) regulates murine hepatic fatty acid trafficking in response to fasting. In this study, we show that L‐Fabp^−/− mice fed a high‐fat Western diet for up to 18 weeks are less obese and accumulate less hepatic triglyceride than C57BL/6J controls. Paradoxically, both control and L‐Fabp^−/− mice manifested comparable glucose intolerance and insulin resistance when fed a Western diet. Protection against obesity in Western diet–fed L‐Fabp^−/− mice was not due to discernable changes in food intake, fat malabsorption, or heat production, although intestinal lipid secretion kinetics were significantly slower in both chow‐fed and Western diet–fed L‐Fabp^−/− mice. By contrast, there was a significant increase in the respiratory exchange ratio in L‐Fabp^−/− mice, suggesting a shift in energy substrate use from fat to carbohydrate, findings supported by an approximately threefold increase in serum lactate. Microarray analysis revealed increased expression of genes involved in lipid synthesis (fatty acid synthase, squalene epoxidase, hydroxy‐methylglutaryl coenzyme A reductase), while genes involved in glycolysis (glucokinase and glycerol kinase) were decreased in L‐Fabp^−/− mice. Fatty acid synthase expression was also increased in the skeletal muscle of L‐Fabp^−/− mice. In conclusion, L‐Fabp may function as a metabolic sensor in regulating lipid homeostasis. We suggest that L‐Fabp^−/− mice are protected against Western diet–induced obesity and hepatic steatosis through a series of adaptations in both hepatic and extrahepatic energy substrate use. (HEPATOLOGY 2006;44:1191–1205.)