Imbalances in glucose and energy homeostasis are at the core of the worldwide epidemic of obesity and diabetes. Here, we illustrate an important role of the TGF-β/Smad3 signaling pathway in regulating glucose and energy homeostasis. Smad3-deficient mice are protected from diet-induced obesity and diabetes. Interestingly, the metabolic protection is accompanied by Smad3^−/− white adipose tissue acquiring the bioenergetic and gene expression profile of brown fat/skeletal muscle. Smad3^−/− adipocytes demonstrate a marked increase in mitochondrial biogenesis, with a corresponding increase in basal respiration, and Smad3 acts as a repressor of PGC-1α expression. We observe significant correlation between TGF-β1 levels and adiposity in rodents and humans. Further, systemic blockade of TGF-β signaling protects mice from obesity, diabetes, and hepatic steatosis. Together, these results demonstrate that TGF-β signaling regulates glucose tolerance and energy homeostasis and suggest that modulation of TGF-β activity might be an effective treatment strategy for obesity and diabetes.