Using an expression cloning strategy, we have identified TFE3, a basic helix-loop-helix protein, as a transactivator of metabolic genes that are regulated through an E-box in their promoters. Adenovirus-mediated expression of TFE3 in hepatocytes in culture and in vivo strongly activated expression of IRS-2 and Akt and enhanced phosphorylation of insulin-signaling kinases such as Akt, glycogen synthase kinase 3beta and p70S6 kinase. TFE3 also induced hexokinase II (HK2) and insulin-induced gene 1 (INSIG1). These changes led to metabolic consequences, such as activation of glycogen and protein synthesis, but not lipogenesis, in liver. Collectively, plasma glucose levels were markedly reduced both in normal mice and in different mouse models of diabetes, including streptozotocin-treated, db/db and KK mice. Promoter analyses showed that IRS2, HK2 and INSIG1 are direct targets of TFE3. Activation of insulin signals in both insulin depletion and resistance suggests that TFE3 could be a therapeutic target for diabetes.