Tumor necrosis factor (TNF)-α causes insulin resistance on glucose uptake in fetal brown adipocytes. We explored the hypothesis that some effects of TNF-α could be mediated by the generation of ceramide, given that TNF-α treatment induced the production of ceramide in these primary cells. A short-chain ceramide analog, C2-ceramide, completely precluded insulin-stimulated glucose uptake and insulin-induced GLUT4 translocation to plasma membrane, as determined by Western blot or immunofluorescent localization of GLUT4. These effects were not produced in the presence of a biologically inactive ceramide analog, C2-dihydroceramide. Analysis of the phosphatidylinositol (PI) 3-kinase signaling pathway indicated that C2-ceramide precluded insulin stimulation of Akt kinase activity, but not of PI-3 kinase or protein kinase C-ζ activity. C2-ceramide completely abolished insulin-stimulated Akt/protein kinase B phosphorylation on regulatory residues Thr 308 and Ser 473, as did TNF-α, and inhibited insulin-induced mobility shift in Akt1 and Akt2 separated in PAGE. Moreover, C2-ceramide seemed to activate a protein phosphatase (PP) involved in dephosphorylating Akt because 1) PP2A activity was increased in C2-ceramide− and TNF-α−treated cells, 2) treatment with okadaic acid concomitantly with C2-ceramide completely restored Akt phosphorylation by insulin, and 3) transient transfection of a constitutively active form of Akt did not restore Akt activity. Our results indicate that ceramide produced by TNF-α induces insulin resistance in brown adipocytes by maintaining Akt in an inactive dephosphorylated state.