Unsuppressed hepatic glucose production (HGP) contributes substantially to glucose intolerance and diabetes, which can be modeled by the genetic inactivation of hepatic insulin receptor substrate 1 (Irs1) and Irs2 (LDKO mice). We previously showed that glucose intolerance in LDKO mice is resolved by hepatic inactivation of the transcription factor FoxO1 (that is, LTKO mice)—even though the liver remains insensitive to insulin. Here, we report that insulin sensitivity in the white adipose tissue of LDKO mice is also impaired but is restored in LTKO mice in conjunction with normal suppression of HGP by insulin. To establish the mechanism by which white adipose tissue insulin signaling and HGP was regulated by hepatic FoxO1, we identified putative hepatokines—including excess follistatin (Fst)—that were dysregulated in LDKO mice but normalized in LTKO mice. Knockdown of hepatic Fst in the LDKO mouse liver restored glucose tolerance, white adipose tissue insulin signaling and the suppression of HGP by insulin; however, the expression of Fst in the liver of healthy LTKO mice had the opposite effect. Of potential clinical significance, knockdown of Fst also improved glucose tolerance in high-fat-fed obese mice, and the level of serum Fst was reduced in parallel with glycated hemoglobin in obese individuals with diabetes who underwent therapeutic gastric bypass surgery. We conclude that Fst is a pathological hepatokine that might be targeted for diabetes therapy during hepatic insulin resistance.