The hindgut hypothesis posits improvements in Type 2 diabetes after gastric bypass surgery are due to enhanced delivery of undigested nutrients to the ileum, which increase incretin production and insulin sensitivity. The present study investigates the effect of ileal interposition (IT), surgically relocating a segment of distal ileum to the proximal jejunum, on glucose tolerance, insulin sensitivity, and glucose transport in the obese Zucker rat. Two groups of obese Zucker rats were studied: IT and sham surgery ad libitum fed (controls). Changes in food intake, body weight and composition, glucose tolerance, insulin sensitivity and tissue glucose uptake, and insulin signaling as well as plasma concentrations of glucagon-like peptide-1 and glucose-dependent insulinotropic peptide were measured. The IT procedure did not significantly alter food intake, body weight, or composition. Obese Zucker rats demonstrated improved glucose tolerance 3 wk after IT compared with the control group (P < 0.05). Euglycemic, hyperinsulinemic clamp and 1-[(14)C]-2-deoxyglucose tracer studies indicate that IT improves whole body glucose disposal, insulin-stimulated glucose uptake, and the ratio of phospho- to total Akt (P < 0.01 vs. control) in striated muscle. After oral glucose, the plasma concentration of glucagon-like peptide-1 was increased, whereas GIP was decreased following IT. Enhanced nutrient delivery to the ileum after IT improves glucose tolerance, insulin sensitivity and muscle glucose uptake without altering food intake, body weight, or composition. These findings support the concept that anatomic and endocrine alterations in gut function play a role in the improvements in glucose homeostasis after the IT procedure.