Adiponectin is a recently described adipokine that has been recognized as a key regulator of insulin sensitivity and tissue inflammation. It is produced by adipose tissue (white and brown) and circulates in the blood at very high concentrations. It has direct actions in liver, skeletal muscle and the vasculature, with prominent roles to improve hepatic insulin sensitivity, increase fuel oxidation [via up-regulation of adenosine monophosphate-activated protein kinase (AMPK) activity] and decrease vascular inflammation. Adiponectin exists in the circulation as varying molecular weight forms, produced by multimerization. Recent data indicate that the high-molecular weight (HMW) complexes have the predominant action in the liver. In contrast to other adipokines, adiponectin secretion and circulating levels are inversely proportional to body fat content. Levels are further reduced in subjects with diabetes and coronary artery disease. Adiponectin antagonizes many effects of tumour necrosis factor-α(TNF-α) and this, in turn, suppresses adiponectin production. Furthermore, adiponectin secretion from adipocytes is enhanced by thiazolidinediones (which also act to antagonize TNF-α effects). Thus, adiponectin may be the common mechanism by which TNF-α promotes, and the thiazolidinediones suppress, insulin resistance and inflammation. Two adiponectin receptors, termed AdipoR1 and AdipoR2, have been identified and these are ubiquitously expressed. AdipoR1 is most highly expressed in skeletal muscle and has a prominent action to activate AMPK, and hence promote lipid oxidation. AdipoR2 is most highly expressed in liver, where it enhances insulin sensitivity and reduces steatosis via activation of AMPK and increased peroxisome-proliferator-activated receptor α ligand activity. T-cadherin, which is expressed in endothelium and smooth muscle, has been identified as an adiponectin-binding protein with preference for HMW adiponectin multimers. Given the low levels of adiponectin in subjects with the metabolic syndrome, and the beneficial effect of the adipokine in animal studies, there is exciting potential for adiponectin replacement therapy in insulin resistance and related disorders.