Obesity is frequently associated with systemic insulin resistance, glucose intolerance, and hyperlipidemia. Impaired insulin action in muscle and paradoxical diet/insulin-dependent overproduction of hepatic lipids are important components of obesity, but their pathogenesis and inter-relationships between muscle and liver are uncertain. We studied two murine obesity models, moderate high-fat-feeding and heterozygous muscle-specific PKC-lambda knockout, in both of which insulin activation of atypical protein kinase C (aPKC) is impaired in muscle, but conserved in liver. In both models, activation of hepatic sterol receptor element binding protein-1c (SREBP-1c) and NFkappaB (nuclear factor-kappa B), major regulators of hepatic lipid synthesis and systemic insulin resistance, was chronically increased in the fed state. In support of a critical mediatory role of aPKC, in both models, inhibition of hepatic aPKC by adenovirally mediated expression of kinase-inactive aPKC markedly diminished diet/insulin-dependent activation of hepatic SREBP-1c and NFkappaB, and concomitantly improved hepatosteatosis, hypertriglyceridemia, hyperinsulinemia, and hyperglycemia. Moreover, in high-fat-fed mice, impaired insulin signaling to IRS-1-dependent phosphatidylinositol 3-kinase, PKB/Akt and aPKC in muscle and hyperinsulinemia were largely reversed. In obesity, conserved hepatic aPKC-dependent activation of SREBP-1c and NFkappaB contributes importantly to the development of hepatic lipogenesis, hyperlipidemia, and systemic insulin resistance. Accordingly, hepatic aPKC is a potential target for treating obesity-associated abnormalities.