Although the class I(A) phosphoinositide 3-kinase (PI3K) pathway is central to the metabolic actions of insulin, its mechanism of action is not well understood. To identify the role of the PI3K pathway in insulin regulation of hepatic function, we ablated the expression of both major regulatory subunits of PI3K by crossing mice lacking Pik3r1 in liver with Pik3r2 null mice, creating liver-specific double knockout mice (L-p85DKO). L-p85DKO mice failed to activate PI3K or generate PIP(3) upon insulin stimulation or activate its two major effectors, Akt and PKClambda/xi. Decreased Akt activation resulted in increased gluconeogenic gene expression, impaired glucose tolerance, and hyperinsulinemia, while the defective activation of PKClambda/xi by insulin was associated with hypolipidemia and decreased transcription of SREBP-1c. These data indicate that the PI3K pathway is critical for insulin's actions in the liver in vivo, and that differential regulation by Akt and PKClambda/xi differentially defines specific actions of insulin and PI3K on hepatic glucose and lipid metabolism.