In this study, we used ob/ob mice as a model to investigate the effects of long-term estradiol administration on insulin sensitivity and to explore the mechanisms that underlie the anti-diabetic effects of estrogen on mouse liver. Female ob/ob mice were randomly divided into two groups and given estradiol (100 µg/kg/day) or vehicle alone for four weeks. Estrogen administration improved glucose tolerance and insulin response to glucose in ob/ob mice. Moreover, insulin resistance and liver triglyceride levels were decreased in response to estrogen administration. Microarray analysis revealed that expression of genes involved in hepatic lipid biosynthesis was decreased in ob/ob mouse livers following estradiol treatment. Further searches for direct estrogen target genes revealed increased hepatic mRNA expression of Stat3 and several known Stat3 target genes in ob/ob livers after long-term estradiol treatment. Furthermore, Stat3 and phosphorylated Stat3 protein is induced in ob/ob mouse liver after long-term estrogen treatment. We also present data showing that Stat3 is rapidly induced by estradiol in mouse livers. This, together with data showing recruitment of ER to the promoter of Stat3 in vivo, suggests that Stat3 is a direct target gene for estradiol. In conclusion, estradiol treatment improves glucose tolerance and insulin sensitivity in ob/ob mice. We propose that this may be mediated, at least partially, via estrogen stimulation of the hepatic expression of Stat3 leading to decreased expression of hepatic lipogenic genes, and thereby to antidiabetic effects.