Hepatic insulin resistance has been linked to activation of protein kinase C epsilon (PKCε) and we have previously shown that global deletion of PKCε protects fat-fed mice against glucose intolerance and improves insulin action in the liver. Using tissue-specific deletion of PKCε, we have further examined the mechanisms involved. We generated liver-specific PKCε KO (LEpsKO) and subjected them to a high fat diet, but unexpectedly, LEpsKO mice did not exhibit any improvement in glucose tolerance when compared to control mice. However, insulin also has indirect effects on hepatic glucose production (HGP), for example through the rapid suppression of fatty acid (FA) release from adipose tissue. Because we have previously observed reduced FA release from adipose tissue in global PKCε KO mice, we next generated adipose tissue-specific PKCε KO (AdEpsKO) mice. When AdEpsKO mice were fed a high fat diet and subjected to ipGTTs after 1, 8 and 16 weeks, they exhibited a significant improvement in glucose tolerance at each time, when compared to "Cre" and “floxed” control mice (iAUC at 8 weeks: 237 vs 506 and 424 mM.min; n=23, 18 and 29; P<0.001). This was not associated with changes in body weight or fat mass, nor an increase in insulin levels, consistent with enhanced insulin sensitivity. Importantly, AdEpsKO mice were better able to suppress plasma FA levels during ipGTTs (to 0.13 vs 0.19 and 0.19 mM at 30 min; P<0.015), consistent with a role for PKCε in the modulation of liver insulin action through effects on the release of FA from adipose tissue. In preliminary euglycaemic-hyperinsulinaemic clamp studies, insulin suppressed HGP further in AdEpsKO mice compared to "floxed" controls (by 19.6 vs 12.2 mg/kg/min, n=3, p<0.05). These studies demonstrate the importance of PKCε in adipose tissue, and while we have not yet ruled out additional mechanisms, such as potential effects on adipokine release, they support a key role for the suppression of FA supply in the regulation of HGP.