Insulin receptor substrate-1 (IRS-1) and IRS-2 are known to transduce and amplify signals emanating from the insulin receptor^,,. Here we show that Grb2-associated binder 1 (Gab1), despite its structural similarity to IRS proteins, is a negative modulator of hepatic insulin action. Liver-specific Gab1 knockout (LGKO) mice showed enhanced hepatic insulin sensitivity with reduced glycemia and improved glucose tolerance. In LGKO liver, basal and insulin-stimulated tyrosine phosphorylation of IRS-1 and IRS-2 was elevated, accompanied by enhanced Akt/PKB activation. Conversely, Erk activation by insulin was suppressed in LGKO liver, leading to defective IRS-1 Ser612 phosphorylation. Thus, Gab1 acts to attenuate, through promotion of the Erk pathway, insulin-elicited signals flowing through IRS and Akt proteins, which represents a novel balancing mechanism for control of insulin signal strength in the liver.