Increased glucose production (GP) is the major determinant of fasting hyperglycemia in diabetes mellitus. Previous studies suggested that lipid metabolism within specific hypothalamic nuclei is a biochemical sensor for nutrient availability that exerts negative feedback on GP. Here we show that central inhibition of fat oxidation leads to selective activation of brainstem neurons within the nucleus of the solitary tract and the dorsal motor nucleus of the vagus and markedly decreases liver gluconeogenesis, expression of gluconeogenic enzymes, and GP. These effects require central activation of ATP-dependent potassium channels (K(ATP)) and descending fibers within the hepatic branch of the vagus nerve. Thus, hypothalamic lipid sensing potently modulates glucose metabolism via neural circuitry that requires the activation of K(ATP) and selective brainstem neurons and intact vagal input to the liver. This crosstalk between brain and liver couples central nutrient sensing to peripheral nutrient production and its disruption may lead to hyperglycemia.