Sphingolipid dysregulation is often associated with insulin resistance, while the enzymes controlling sphingolipid metabolism are emerging as therapeutic targets for improving insulin sensitivity. We report herein that sphingosine kinase 2 (SphK2), a key enzyme in sphingolipid catabolism, plays a critical role in the regulation of hepatic insulin signaling and glucose homeostasis both in vitro and in vivo. Hepatocyte-specific Sphk2 knockout mice exhibit pronounced insulin resistance and glucose intolerance. Likewise, SphK2-deficient hepatocytes are resistant to insulin-induced activation of the phosphoinositide 3-kinase (PI3K)-Akt-FoxO1 pathway and elevated hepatic glucose production. Mechanistically, SphK2 deficiency leads to the accumulation of sphingosine that, in turn, suppresses hepatic insulin signaling by inhibiting PI3K activation in hepatocytes. Either reexpressing functional SphK2 or pharmacologically inhibiting sphingosine production restores insulin sensitivity in SphK2-deficient hepatocytes. In conclusion, the current study provides both experimental findings and mechanistic data showing that SphK2 and sphingosine in the liver are critical regulators of insulin sensitivity and glucose homeostasis.