To investigate the role of brain insulin action in the pathogenesis and treatment of diabetes, we asked whether neuronal insulin signaling is required for glucose-lowering during insulin treatment of diabetes. Hypothalamic signaling via the insulin receptor substrate-phosphatidylinositol 3-kinase (IRS-PI3K) pathway, a key intracellular mediator of insulin action, was reduced in rats with uncontrolled diabetes induced by streptozotocin (STZ-DM). Further, infusion of a PI3K inhibitor into the third cerebral ventricle of STZ-DM rats prior to peripheral insulin injection attenuated insulin-induced glucose lowering by approximately 35%-40% in both acute and chronic insulin treatment paradigms. Conversely, increased PI3K signaling induced by hypothalamic overexpression of either IRS-2 or protein kinase B (PKB, a key downstream mediator of PI3K action) enhanced the glycemic response to insulin by approximately 2-fold in STZ-DM rats. We conclude that hypothalamic insulin signaling via the IRS-PI3K pathway is a key determinant of the response to insulin in the management of uncontrolled diabetes.