Caloric restriction and intermittent fasting are emerging therapeutic strategies against obesity, insulin resistance and their complications. However, the effectors that drive this response are not completely defined. Here we identify arginase 2 (Arg2) as a fasting-induced hepatocyte factor that protects against hepatic and peripheral fat accumulation, hepatic inflammatory responses, and insulin and glucose intolerance in obese murine models. Arg2 is upregulated in fasting conditions and upon treatment with the hepatocyte glucose transporter inhibitor trehalose. Hepatocyte-specific Arg2 overexpression enhances basal thermogenesis, and protects from weight gain, insulin resistance, glucose intolerance, hepatic steatosis and hepatic inflammation in diabetic mouse models. Arg2 suppresses expression of the regulator of G-protein signalling (RGS) 16, and genetic RGS16 reconstitution reverses the effects of Arg2 overexpression. We conclude that hepatocyte Arg2 is a critical effector of the hepatic glucose fasting response and define a therapeutic target to mitigate the complications of obesity and non-alcoholic fatty liver disease.