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Background: Obesity is characterized by the accumulation of fat in the liver and other tissues, leading to insulin resistance. We have previously shown that a specific inhibitor of glucosylceramide synthase, which inhibits the initial step in the synthesis of glycosphingolipids (GSLs), improved glucose metabolism and decreased hepatic steatosis in both ob/ob and diet-induced obese (DIO) mice. Here we have determined in the DIO mouse model the efficacy of a related small molecule compound, Genz-112638, which is currently being evaluated clinically for the treatment of Gaucher disease, a lysosomal storage disorder. Methodology/Principal Findings: DIO mice were treated with the Genz-112638 for 12 to 16 weeks by daily oral gavage. Genz-112638 lowered HbA1c levels and increased glucose tolerance. Whole body adiposity was not affected in normal mice, but decreased in drug-treated obese mice. Drug treatment also significantly lowered liver triglyceride levels and reduced the development of hepatic steatosis. We performed hyperinsulinemic-euglycemic clamps on the DIO mice treated with Genz-112638 and showed that insulin-mediated suppression of hepatic glucose production increased significantly compared to the placebo treated mice, indicating a marked improvement in hepatic insulin sensitivity. Conclusions/Significance: These results indicate that GSL inhibition in obese mice primarily results in an increase in insulin action in the liver, and suggests that GSLs may have an important role in hepatic insulin resistance in conditions of obesity. [ABSTRACT FROM AUTHOR]