Besides their role in facilitating lipid absorption, bile acids are increasingly being recognized as signaling molecules that activate cell-signaling receptors. Targeted disruption of the sterol 12α-hydroxylase gene (Cyp8b1) results in complete absence of cholic acid (CA) and its derivatives. Here we investigate the effect of Cyp8b1 deletion on glucose homeostasis. Absence of Cyp8b1 results in improved glucose tolerance, insulin sensitivity, and β-cell function, mediated by absence of CA in Cyp8b1(-/-) mice. In addition, we show that reduced intestinal fat absorption in the absence of biliary CA leads to increased free fatty acids reaching the ileal L cells. This correlates with increased secretion of the incretin hormone GLP-1. GLP-1, in turn, increases the biosynthesis and secretion of insulin from β-cells, leading to the improved glucose tolerance observed in the Cyp8b1(-/-) mice. Thus, our data elucidate the importance of Cyp8b1 inhibition on the regulation of glucose metabolism., (© 2015 by the American Diabetes Association. Readers may use this article as long as the work is properly cited, the use is educational and not for profit, and the work is not altered.)