Insulin is the key hormone that controls glucose homeostasis. Dysregulation of insulin function causes diabetes mellitus. Among the two major forms of diabetes, type 2 diabetes accounts for over 90% of the affected population. The incidence of type 2 diabetes is highly related to obesity. To find novel proteins potentially involved in obesity-related insulin resistance and type 2 diabetes, a functional expression screen was performed to search for genes that negatively regulate insulin signaling. Specifically, a reporter system comprised of the PEPCK promoter upstream of alkaline phosphatase was used in a hepatocyte cell-based assay to screen an expression cDNA library for genes that reverse insulin-induced repression of PEPCK transcription. The cDNA library used in this study was derived from the white adipose tissue of ob/ob mice, which are highly insulin-resistant. The mitogen-activated dual specificity protein kinase phosphatase 4 (MKP-4) was identified as a candidate gene in this screen. Here we show that MKP-4 is expressed in insulin-responsive tissues and that the expression levels are up-regulated in obese insulin-resistant rodent models. Heterologous expression of MKP-4 in preadipocytes significantly blocked insulin-induced adipogenesis, and overexpression of MKP-4 in adipocytes inhibited insulin-stimulated glucose uptake. Our data suggest that MKP-4 negatively regulates insulin signaling and, consequently, may contribute to the pathogenesis of insulin resistance.