Liver glucose metabolism plays a central role in glucose homeostasis and may also regulate feeding and energy expenditure. Here we assessed the impact of glucose transporter 2 (Glut2) gene inactivation in adult mouse liver (LG2KO mice). Loss of Glut2 suppressed hepatic glucose uptake but not glucose output. In the fasted state, expression of carbohydrate-responsive element-binding protein (ChREBP) and its glycolytic and lipogenic target genes was abnormally elevated. Feeding, energy expenditure, and insulin sensitivity were identical in LG2KO and control mice. Glucose tolerance was initially normal after Glut2 inactivation, but LG2KO mice exhibited progressive impairment of glucose-stimulated insulin secretion even though β cell mass and insulin content remained normal. Liver transcript profiling revealed a coordinated downregulation of cholesterol biosynthesis genes in LG2KO mice that was associated with reduced hepatic cholesterol in fasted mice and reduced bile acids (BAs) in feces, with a similar trend in plasma. We showed that chronic BAs or farnesoid X receptor (FXR) agonist treatment of primary islets increases glucose-stimulated insulin secretion, an effect not seen in islets from Fxr(-/-) mice. Collectively, our data show that glucose sensing by the liver controls β cell glucose competence and suggest BAs as a potential mechanistic link.