Metformin is a first-line drug for the treatment of individuals with type 2 diabetes, yet its precise mechanism of action remains unclear. Metformin exerts its antihyperglycemic action primarily through lowering hepatic glucose production (HGP). This suppression is thought to be mediated through inhibition of mitochondrial respiratory complex I, and thus elevation of 5'-adenosine monophosphate (AMP) levels and the activation of AMP-activated protein kinase (AMPK), though this proposition has been challenged given results in mice lacking hepatic AMPK. Here we report that the AMP-inhibited enzyme fructose-1,6-bisphosphatase-1 (FBP1), a rate-controlling enzyme in gluconeogenesis, functions as a major contributor to the therapeutic action of metformin. We identified a point mutation in FBP1 that renders it insensitive to AMP while sparing regulation by fructose-2,6-bisphosphate (F-2,6-P2), and knock-in (KI) of this mutant in mice significantly reduces their response to metformin treatment. We observe this during a metformin tolerance test and in a metformin-euglycemic clamp that we have developed. The antihyperglycemic effect of metformin in high-fat diet-fed diabetic FBP1-KI mice was also significantly blunted compared to wild-type controls. Collectively, we show a new mechanism of action for metformin and provide further evidence that molecular targeting of FBP1 can have antihyperglycemic effects.