Obesity is characterized by a massive infiltration of the adipose tissue by macrophages. Adipocytes, together with macrophages create a crosstalk between inflammation and insulin resistance. Excess saturated FFA, such as palmitate, absorbed via the portal system may cause glucose intolerance and inflammation, which leads to insulin resistance. In this study, we aimed to evaluate the potency of alantolactone (AL), a sesquiterpene lactone isolated from Inula helenium in reducing palmitate-induced glucose intolerance, fat accumulation, and inflammation in 3T3-L1 adipocytes and adipocyte-macrophage co-culture system (3T3-L1-RAW264.7). We observed that palmitate reduced glucose uptake and increased fat accumulation, which indicated dysfunctional adipocytes with inadequate lipid storage. However, AL treatment reversed these changes in a dose-dependent manner (P < 0.05). Palmitate activated c-Jun N-terminal kinases (JNK) and IκB kinase β/α (IKKβ/α) phosphorylation, and increased the levels of the proinflammatory cytokines (tumor necrosis factor-α and interleukin-6 [IL-6]) and chemokines (monocyte chemoattractant protein-1 [MCP-1]). AL treatment selectively reduced JNK-associated mitogen-activated protein kinase pathway (JNK and extracellular signal-regulated kinase phosphorylation). However, it did not affect NF-κB pathway in adipocytes. In addition, AL decreased the gene expression of JNK upregulating factor, toll-like receptor-4 (TLR4), suggesting inhibition of TLR4-JNK signaling. Moreover, it reduced inflammation-associated IL-6 and MCP-1 mRNA levels in both adipocytes and adipocyte-macrophage system. Our study showed that palmitate treatment led to adipocyte dysfunction and macrophage infiltration; however, AL improved palmitate-induced glucose intolerance and inflammation. These findings suggest that AL may inhibit obesity-induced insulin resistance and improve glucose homeostasis and inflammation in insulin target tissues.