Disruption of the Gys2 gene encoding the liver isoform of glycogen synthase generates a mouse strain (LGSKO) that almost completely lacks hepatic glycogen, has impaired glucose disposal, and is pre-disposed to entering the fasted state. This study investigated how the lack of liver glycogen increases fat accumulation and the development of liver insulin resistance. Insulin signaling in LGSKO mice was reduced in liver, but not muscle, suggesting an organ-specific defect. Phosphorylation of components of the hepatic insulin-signaling pathway, namely IRS1, Akt, and GSK3, was decreased in LGSKO mice. Moreover, insulin stimulation of their phosphorylation was significantly suppressed, both temporally and in an insulin dose response. Phosphorylation of the insulin-regulated transcription factor FoxO1 was somewhat reduced and insulin treatment did not elicit normal translocation of FoxO1 out of the nucleus. Fat overaccumulated in LGSKO livers, showing an aberrant distribution in the acinus, an increase not explained by a reduction in hepatic triglyceride export. Rather, when administered orally to fasted mice, glucose was directed toward hepatic lipogenesis as judged by the activity, protein levels, and expression of several fatty acid synthesis genes, namely, acetyl-CoA carboxylase, fatty acid synthase, SREBP1c, chREBP, glucokinase, and pyruvate kinase. Furthermore, using cultured primary hepatocytes, we found that lipogenesis was increased by 40% in LGSKO cells compared with controls. Of note, the hepatic insulin resistance was not associated with increased levels of pro-inflammatory markers. Our results suggest that loss of liver glycogen synthesis diverts glucose toward fat synthesis, correlating with impaired hepatic insulin signaling and glucose disposal.