Defective liver gluconeogenesis is the main mechanism leading to fasting hyperglycemia in type 2 diabetes, and, in concert with steatosis, it is the hallmark of hepatic insulin resistance. Experimental obesity results, at least in part, from hypothalamic inflammation, which leads to leptin resistance and defective regulation of energy homeostasis. Pharmacological or genetic disruption of hypothalamic inflammation restores leptin sensitivity and reduces adiposity. Here, we evaluate the effect of a hypothalamic anti-inflammatory approach to regulating hepatic responsiveness to insulin. Obese rodents were treated by intracerebroventricular injections, with immunoneutralizing antibodies against Toll-like receptor (TLR)4 or tumor necrosis factor (TNF)α, and insulin signal transduction, hepatic steatosis, and gluconeogenesis were evaluated. The inhibition of either TLR4 or TNFα reduced hypothalamic inflammation, which was accompanied by the reduction of hypothalamic resistance to leptin and improved insulin signal transduction in the liver. This was accompanied by reduced liver steatosis and reduced hepatic expression of markers of steatosis. Furthermore, the inhibition of hypothalamic inflammation restored defective liver glucose production. All these beneficial effects were abrogated by vagotomy. Thus, the inhibition of hypothalamic inflammation in obesity results in improved hepatic insulin signal transduction, leading to reduced steatosis and reduced gluconeogenesis. All these effects are mediated by parasympathetic signals delivered by the vagus nerve.