Adenosine deaminase (ADA) catalyzes the irreversible deamination of adenosine to inosine and regulates adenosine concentration. ADA ubiquitously expresses in various tissues to mediate adenosine receptor signaling. A significant increase in plasma ADA activity has been shown to be associated with the pathogenesis of type 2 diabetes mellitus (T2DM). Here we show that elevated plasma ADA activity is a compensated response to high level of adenosine in T2DM and plays an essential role in the regulation of glucose homeostasis. Supplementing with more ADA, instead of inhibiting ADA can reduces adenosine levels and decreases hepatic gluconeogenesis. ADA restores a euglycemic state and recovers functional islets in db/db and high-fat-STZ diabetic mice. Mechanistically, ADA catabolizes adenosine and increases Akt and FoxO1 phosphorylation independent of insulin action. ADA lowers blood glucose at a slower rate and longer duration compared to insulin, delaying or blocking the incidence of insulinogenic hypoglycemia shock. Finally, ADA suppresses gluconeogenesis in fasted mice and insulin-deficient diabetic mice, indicating the ADA regulating gluconeogenesis is a universal biological mechanism. Overall, these results suggest that ADA is expected to be a new therapeutic target for diabetes.