Type 2 diabetes is a polygenic disease characterized by defects in both insulin secretion and insulin action. We have previously reported that isolated insulin resistance in muscle by a tissue-specific insulin receptor knockout (MIRKO mouse) is not sufficient to alter glucose homeostasis, whereas beta-cell-specific insulin receptor knockout (betaIRKO) mice manifest severe progressive glucose intolerance due to loss of glucose-stimulated acute-phase insulin release. To explore the interaction between insulin resistance in muscle and altered insulin secretion, we created a double tissue-specific insulin receptor knockout in these tissues. Surprisingly, betaIRKO-MIRKO mice show an improvement rather than a deterioration of glucose tolerance when compared to betaIRKO mice. This is due to improved glucose-stimulated acute insulin release and redistribution of substrates with increased glucose uptake in adipose tissue and liver in vivo, without a significant decrease in muscle glucose uptake. Thus, insulin resistance in muscle leads to improved glucose-stimulated first-phase insulin secretion from beta-cells and shunting of substrates to nonmuscle tissues, collectively leading to improved glucose tolerance. These data suggest that muscle, either via changes in substrate availability or by acting as an endocrine tissue, communicates with and regulates insulin sensitivity in other tissues.