The decrease in incretin effects is an important etiologic component of type 2 diabetes with unknown mechanisms. In an attempt to understand obesity-induced changes in liver oxygen homeostasis, we found that liver HIF-1α expression was increased mainly by soluble factors released from obese adipocytes, leading to decreased incretin effects. Deletion of hepatocyte HIF-1α protected obesity-induced glucose intolerance without changes in body weight, liver steatosis, or insulin resistance. In-depth mouse metabolic phenotyping revealed that obesity increased first-pass degradation of an incretin hormone GLP-1 with increased liver DPP4 expression and decreased sinusoidal blood flow rate, reducing active GLP-1 levels in peripheral circulation. Hepatocyte HIF-1α KO blocked these changes induced by obesity. Deletion of hepatocyte HIF-2α did not change liver DPP4 expression but improved hepatic steatosis. Our results identify a previously unknown pathway for obesity-induced impaired beta cell glucose response (incretin effects) and the development of glucose intolerance through inter-organ communications.