Increased adipose tissue (AT) lipogenesis is associated with enhanced insulin sensitivity. Mice overexpressing Glut4 in AT (AG4OX) have elevated AT lipogenesis and increased glucose tolerance in spite of obesity and elevated circulating fatty acids. To determine if the lipid profile contributes to improved glucose homeostasis in AG4OX, we performed untargeted lipidomic analysis of AT. This revealed a 16-18-fold increase in a novel class of lipids in AG4OX AT vs wildtype mice. Using a targeted Mass Spec approach, we identified 16 novel lipid family members with multiple isomers based on structural variations. These lipids are branched fatty acid esters of hydroxy fatty acids or FAHFAs. We studied the biologic effects of the isomers of palmitic acid hydroxy stearic acid or PAHSAs. PAHSAs are present at highest levels in brown and white adipose tissue with lower levels in many other tissues. Most isomers are reduced 50-65% in serum and subcutaneous AT of insulin-resistant vs insulin-sensitive people. Nearly all isomers in humans correlate remarkably strongly with insulin sensitivity determined by euglycemic clamp. PAHSAs are also reduced in subcutaneous white AT in mice fed a High Fat Diet. A single oral dose of PAHSAs lowers ambient glycemia and enhances glucose tolerance in insulin-resistant obese mice while stimulating GLP1 and insulin secretion. PAHSAs also augment insulin stimulated glucose uptake and Glut4 translocation to the plasma membrane in adipocytes. PAHSAs suppress inflammatory processes in immune cells in vitro and decrease proinflammatory cytokines in adipose tissue macrophages in vivo. Biological effects of PAHSAs are mediated through lipid-responsive GPCRs. We have identified several enzymes that hydrolyze FAHFAs. One of these appears to play a major role in hydrolyzing FAHFAs in the pancreas. A gain-of-function mutation in this hydrolytic enzyme is associated with Maturity Onset Diabetes of the Young type 8. In summary, we identified a novel class of lipids that are sythesized in mammalian tissues. These lipids improve glucose-insulin homeostasis and are anti-inflammatory. In conclusion, restoration of the low PAHSA levels in insulin-resistant people may be effective to treat or prevent type 2 diabetes.