The identity and subcellular localization of the bioactive lipid species that causes hepatic insulin resistance remain controversial. Though chronic diacylglycerol acyltransferase 2 (DGAT2) knockdown improves hepatic steatosis and insulin action, we hypothesized that acute DGAT2 knockdown would transiently increase hepatic diacylglycerol (DAG) content to specifically assess the role of hepatic DAG on hepatic insulin action. Regular chow-fed rats were treated with a single dose of DGAT2 antisense oligonucleotide and studied 2 days later. The content and subcellular localization of sn-1,2, sn-2,3 and sn-1,3 DAGs were assessed by LC-MS/MS in the endoplasmic reticulum (ER), mitochondrial (MIT), plasma membrane (PM), lipid droplet (LD) and cytosol (CYT) fractions. Acute knockdown of hepatic DGAT2 induced hepatic insulin resistance with impaired suppression of hepatic glucose production during a hyperinsulinemic-euglycemic clamp. Insulin receptor kinase (IRK) activation was impaired, as reflected by reduced insulin-stimulated IRK Y1162 phosphorylation. This was associated with increased PKCε activation, as reflected by increased translocation from CYT to membrane, and increased sn-1,2 DAG content specifically in the PM. In contrast, there were no changes in hepatic ceramide content or sn-2,3 and sn-1,3 DAGs in the five subcellular fractions tested (ER, MIT, PM, LD, CYT). We next infused [13C16] palmitate in 24-hr-fasted rats to track hepatic DAG synthesis in vivo and observed that sn-1,2 DAGs were the major (73%) product of re-esterification from exogenous fatty acids, compared to sn-2,3 (25%) and sn-1,3 (2%) DAGs. We also found that sn-1,2 and sn-2,3 DAGs were primarily synthesized in the ER before translocating to PM, whereas sn-1,3 DAGs were exclusively produced in the LD by lipolysis. Conclusion: These data demonstrate that sn-1,2 DAGs in the PM, derived from re-esterification of exogenous fatty acids, are sufficient to induce hepatic insulin resistance at the level of IRK. Disclosure K. Lyu: None. Y. Zhang: None. D. Zhang: None. M. Kahn: None. Y. Nozaki: None. S. Bhanot: None. J. Bogan: None. G. Cline: None. V. Samuel: None. G.I. Shulman: Advisory Panel; Self; AstraZeneca, Janssen Research & Development, Merck & Co., Inc. Advisory Panel; Spouse/Partner; Merck & Co., Inc. Board Member; Self; Novo Nordisk A/S. Consultant; Self; Aegerion Pharmaceuticals, IMetabolic BioPharma Corporation, Longitude Capital, Nimbus Discovery, Inc., Staten Biotechnology B.V. Funding National Institutes of Health (R01DK116774)