Skeletal muscle is the principal tissue responsible for insulin-stimulated glucose disposal and is thus the major site of peripheral insulin resistance. Urocortin 2 (Ucn-2), a corticotropin releasing factor (CRF) family member and the type 2 CRF receptor (CRFR2) are highly expressed in skeletal muscle. To determine the physiological role of Ucn-2, we generated mice deficient in this peptide. Using glucose and insulin tolerance tests and hyperinsulinemic euglycemic glucose clamp studies in mice fed standard or high fat diets, we demonstrated that mice lacking Ucn-2 exhibit increased insulin sensitivity and are protected against fat induced insulin resistance. Administration of synthetic Ucn-2 to mutant mice prior to the glucose and insulin tolerance tests restores blood glucose to wild type levels. Administration of a CRFR2 selective antagonist to wild type mice results in a glucose tolerance test profile that mirrors that of Ucn-2-null mice. Ucn-2-null and wild type mice gain weight and consume food similarly, both on standard or high fat diets. However, significant increases in blood glucose and insulin levels are observed only in the wild type mice and not in Ucn-2 null mice. Body composition measurements of Ucn-2-null mice on a high fat diet demonstrate decrease in fat and increase in lean tissue compared to wild type. Cellular mechanisms mediating Ucn-2 effects were studied using in-vitro and in-vivo systems. The null mice display increased glucose uptake in skeletal muscle putatively through the removal of Ucn-2-mediated inhibition on insulin signaling. This balance modulates insulin signaling and glucose uptake in skeletal muscle cells. These data support a physiological function for Ucn-2 as a local regulator of glucose uptake. Because impaired glucose transport in muscle contributes to the pathogenesis of type 2 diabetes, our results suggest Ucn-2/CRFR2 pathway as a potential targets for the management of this disease.