During insulin-resistant states such as type II diabetes mellitus (T2DM), insulin fails to suppress hepatic glucose production (HGP) yet promotes lipid synthesis. This metabolic state has been termed "selective insulin resistance" to indicate a defect in one arm of the insulin-signaling cascade, potentially downstream of Akt. Here we demonstrate that Akt-dependent activation of mTORC1 and inhibition of Foxo1 are required and sufficient for de novo lipogenesis, suggesting that hepatic insulin signaling is likely to be intact in insulin-resistant states. Moreover, cell-nonautonomous suppression of HGP by insulin depends on a reduction of adipocyte lipolysis and serum FFAs but is independent of vagal efferents or glucagon signaling. These data are consistent with a model in which, during T2DM, intact liver insulin signaling drives enhanced lipogenesis while excess circulating FFAs become a dominant inducer of nonsuppressible HGP.