The obesity epidemic has led to an increased incidence of nonalcoholic fatty liver disease (NAFLD) and type 2 diabetes. AMP-activated protein kinase (Ampk) regulates energy homeostasis and is activated by cellular stress, hormones and the widely prescribed type 2 diabetes drug metformin. Ampk phosphorylates mouse acetyl-CoA carboxylase 1 (Acc1; refs. 3,4) at Ser79 and Acc2 at Ser212, inhibiting the conversion of acetyl-CoA to malonyl-CoA. The latter metabolite is a precursor in fatty acid synthesis and an allosteric inhibitor of fatty acid transport into mitochondria for oxidation. To test the physiological impact of these phosphorylation events, we generated mice with alanine knock-in mutations in both Acc1 (at Ser79) and Acc2 (at Ser212) (Acc double knock-in, AccDKI). Compared to wild-type mice, these mice have elevated lipogenesis and lower fatty acid oxidation, which contribute to the progression of insulin resistance, glucose intolerance and NAFLD, but not obesity. Notably, AccDKI mice made obese by high-fat feeding are refractory to the lipid-lowering and insulin-sensitizing effects of metformin. These findings establish that inhibitory phosphorylation of Acc by Ampk is essential for the control of lipid metabolism and, in the setting of obesity, for metformin-induced improvements in insulin action.