Fibroblast growth factor 21 (FGF21) is a metabolic hormone with pleiotropic effects on regulating glucose and lipid homeostasis and insulin sensitivity. However, the mechanisms underlying the metabolic actions of FGF21 remain unknown. Here we show that the insulin-sensitizing adipokine adiponectin is a downstream effector of FGF21. Treatments with FGF21 enhanced both expression and secretion of adiponectin in adipocytes, thereby increasing serum levels of adiponectin in mice. Adiponectin knockout mice were refractory to several therapeutic benefits of FGF21, including alleviation of obesity-associated hyperglycemia, hypertriglyceridemia, insulin resistance, and hepatic steatosis. Furthermore, the effects of FGF21 on attenuation of obesity-induced impairment in insulin signaling in liver and skeletal muscle were abrogated in adiponectin knockout mice, whereas FGF21-mediated activation of ERK1/ERK2 in adipose tissues remained unaffected. Therefore, adiponectin couples FGF21 actions in local adipocytes to liver and skeletal muscle, thereby mediating the systemic effects of FGF21 on energy metabolism and insulin sensitivity.