The active thyroid hormone, triiodothyronine (T3), regulates mitochondrial uncoupling protein activity and related thermogenesis in peripheral tissues. Type 2 deiodinase (DII), an enzyme that catalyzes active thyroid hormone production, and mitochondrial uncoupling protein 2 (UCP2) are also present in the hypothalamic arcuate nucleus, where their interaction and physiological significance have not been explored. Here, we report that DII-producing glial cells are in direct apposition to neurons coexpressing neuropeptide Y (NPY), agouti-related protein (AgRP), and UCP2. Fasting increased DII activity and local thyroid hormone production in the arcuate nucleus in parallel with increased GDP-regulated UCP2-dependent mitochondrial uncoupling. Fasting-induced T3-mediated UCP2 activation resulted in mitochondrial proliferation in NPY/AgRP neurons, an event that was critical for increased excitability of these orexigenic neurons and consequent rebound feeding following food deprivation. These results reveal a physiological role for a thyroid-hormone-regulated mitochondrial uncoupling in hypothalamic neuronal networks.