This study explored the role of apoE receptor-2 (apoER2), a unique member of the LDL receptor family proteins with a restricted tissue expression profile, in modulating diet-induced obesity and diabetes. Unlike wild type mice and humans in which chronic feeding of a high fat Western type diet leads to obesity and the pre-diabetic state of hyperinsulinemia prior to hyperglycemia onset, the Lrp8-/- mice with global apoER2 deficiency displayed lower body weight and adiposity, slower development of hyperinsulinemia, but accelerated onset of hyperglycemia. Despite their lower adiposity, adipose tissues in Western diet-fed Lrp8-/- mice were more inflamed compared to wild type mice. Additional experiments revealed that the hyperglycemia observed in Western diet-fed Lrp8-/- mice was due to impaired glucose-induced insulin secretion, ultimately leading to hyperglycemia, adipocyte dysfunction, and inflammation upon chronic feeding of the Western diet. Interestingly, bone marrow-specific apoER2 deficient mice were not defective in insulin secretion, exhibiting increased adiposity and hyperinsulinemia compared to wild type mice. Analysis of bone marrow-derived macrophages revealed that apoER2 deficiency impeded inflammation resolution with lower secretion of IFN-β and IL-10 in response to LPS stimulation of IL-4 primed cells. The apoER2-deficient macrophages also showed increased level of disabled-2 (Dab-2) as well as increased cell surface TLR4, suggesting that apoER2 participates in Dab-2 regulation of TLR4 signaling. Taken together, these results showed that apoER2 deficiency in macrophages sustains diet-induced tissue inflammation and accelerates obesity and diabetes onset while apoER2 deficiency in other cell types contributes to hyperglycemia and inflammation via defective insulin secretion.