Adiponectin, also known as Acrp30, is an adipose tissue-derived hormone with anti-atherogenic, anti-diabetic and insulin sensitizing properties. Two seven-transmembrane domain-containing proteins, AdipoR1 and AdipoR2, have recently been identified as adiponectin receptors, yet signalling events downstream of these receptors remain poorly defined. By using the cytoplasmic domain of AdipoR1 as bait, we screened a yeast two-hybrid cDNA library derived from human fetal brain. This screening led to the identification of a phosphotyrosine binding domain and a pleckstrin homology domain-containing adaptor protein, APPL1 (adaptor protein containing pleckstrin homology domain, phosphotyrosine binding (PTB) domain and leucine zipper motif). APPL1 interacts with adiponectin receptors in mammalian cells and the interaction is stimulated by adiponectin. Overexpression of APPL1 increases, and suppression of APPL1 level reduces, adiponectin signalling and adiponectin-mediated downstream events (such as lipid oxidation, glucose uptake and the membrane translocation of glucose transport 4 (GLUT4)). Adiponectin stimulates the interaction between APPL1 and Rab5 (a small GTPase) interaction, leading to increased GLUT4 membrane translocation. APPL1 also acts as a critical regulator of the crosstalk between adiponectin signalling and insulin signalling pathways. These results demonstrate a key function for APPL1 in adiponectin signalling and provide a molecular mechanism for the insulin sensitizing function of adiponectin.