Impaired skeletal muscle fatty acid oxidation has been suggested to contribute to insulin resistance and glucose intolerance. However, increasing muscle fatty acid oxidation may cause a reciprocal decrease in glucose oxidation, which might impair insulin sensitivity and glucose tolerance. We therefore investigated what effect inhibition of mitochondrial fatty acid uptake has on whole-body glucose tolerance and insulin sensitivity in obese insulin-resistant mice. C57BL/6 mice were fed a high-fat diet (60% calories from fat) for 12 weeks to develop insulin resistance. Subsequent treatment of mice for 4 weeks with the carnitine palmitoyltransferase-1 inhibitor, oxfenicine (150 mg/kg i.p. daily), resulted in improved whole-body glucose tolerance and insulin sensitivity. Exercise capacity was increased in oxfenicine-treated mice, which was accompanied by an increased respiratory exchange ratio. In the gastrocnemius muscle, oxfenicine increased pyruvate dehydrogenase activity, membrane GLUT4 content, and insulin-stimulated Akt phosphorylation. Intramyocellular levels of lipid intermediates, including ceramide, long-chain acyl CoA, and diacylglycerol, were also decreased. Our results demonstrate that inhibition of mitochondrial fatty acid uptake improves insulin sensitivity in diet-induced obese mice. This is associated with increased carbohydrate utilization and improved insulin signaling in the skeletal muscle, suggestive of an operating Randle Cycle in muscle.