Insulin resistance is a primary defect in type 2 diabetes characterized by impaired peripheral glucose uptake and insufficient suppression of hepatic glucose output. Insulin signaling inhibits liver glucose production by inducing nuclear exclusion of the gluconeogenic transcription factor FOXO1 in an Akt-dependent manner. Through the concomitant application of genome-scale functional screening and quantitative image analysis, we have identified PTP-MEG2 as a modulator of insulin-dependent FOXO1 subcellular localization. Ectopic expression of PTP-MEG2 in cells inhibited insulin-induced phosphorylation of the insulin receptor, while RNAi-mediated reduction of PTP-MEG2 transcript levels enhanced insulin action. Additionally, adenoviral-mediated depletion of PTP-MEG2 in livers of diabetic (db/db) mice resulted in insulin sensitization and normalization of hyperglycemia. These data implicate PTP-MEG2 as a mediator of blood glucose homeostasis through antagonism of insulin signaling, and suggest that modulation of PTP-MEG2 activity may be an effective strategy in the treatment of type 2 diabetes.