The branched-chain amino acids (BCAA) accumulated in type 2 diabetes are independent contributors to insulin resistance. The activity of branched-chain α-keto acid dehydrogenase (BCKD) complex, rate-limiting enzyme in BCAA catabolism, is reduced in diabetic states, which contributes to elevated BCAA concentrations. However, the mechanisms underlying decreased BCKD activity remain poorly understood. Here, we demonstrate that mitochondrial phosphatase 2C (PP2Cm), a newly identified BCKD phosphatase that increases BCKD activity, was significantly downregulated in ob/ob and type 2 diabetic mice. Interestingly, in adiponectin (APN) knockout (APN−/−) mice fed with a high-fat diet (HD), PP2Cm expression and BCKD activity were significantly decreased, whereas BCKD kinase (BDK), which inhibits BCKD activity, was markedly increased. Concurrently, plasma BCAA and branched-chain α-keto acids (BCKA) were significantly elevated. APN treatment markedly reverted PP2Cm, BDK, BCKD activity, and BCAA and BCKA levels in HD-fed APN−/− and diabetic animals. Additionally, increased BCKD activity caused by APN administration was partially but significantly inhibited in PP2Cm knockout mice. Finally, APN-mediated upregulation of PP2Cm expression and BCKD activity were abolished when AMPK was inhibited. Collectively, we have provided the first direct evidence that APN is a novel regulator of PP2Cm and systematic BCAA levels, suggesting that targeting APN may be a pharmacological approach to ameliorating BCAA catabolism in the diabetic state.