We investigated the mechanism by which a selective increase in arterial insulin can suppress hepatic glucose production in vivo. Isotopic (3-3H-glucose) and arteriovenous difference methods were used in overnight-fasted, conscious dogs. A pancreatic clamp (somatostatin, basal portal insulin, and glucagon infusions) was used to control the endocrine pancreas. Equilibration (100 min) and basal (40 min) periods were followed by a 180-min test period. In control dogs (n = 5), basal insulin delivery was continued throughout the study. In the other two groups, peripheral insulin was selectively increased at the beginning of the test period by stopping the portal insulin infusion and infusing insulin peripherally at twice the basal portal rate. One group (INS + FAT; n = 6) received an infusion of 20% intralipid + heparin (0.5 U x kg(-1) x min(-1)) to clamp the nonesterified fatty acid (NEFA) levels during hyperinsulinemia; the other group (INS; n = 7) received only saline during the experimental period. In the INS group, a selective increase in peripheral insulin of 84 pmol/l was achieved (36 +/- 6 to 120 +/- 24 pmol/l, last 30 min) while portal insulin was unaltered (84 +/- 18 pmol/l). In the INS + FAT group, a similar increase in peripheral insulin was achieved (36 +/- 6 to 114 +/- 6 pmol/l, last 30 min); again, portal insulin was unaltered (96 +/- 12 pmol/l). In the control group, basal insulin did not change. Glucagon and glucose remained near basal values in all protocols. In the INS group, NEFA levels dropped from 700 +/- 90 (basal) to 230 +/- 65 micromol/l (last 30 min; P > 0.05), but in the INS + FAT group changed minimally (723 +/- 115 [basal] to 782 +/- 125 micromol/l [last 30 min]). In the INS group, net hepatic glucose output dropped by 6.7 micromol x kg(-1) x min(-1) (P < 0.05), whereas in the INS + FAT group it dropped by 3.9 micromol x kg(-1) x min(-1) (P < 0.05). When insulin levels were not increased (i.e., in the control group), net hepatic glucose output dropped 1.7 micromol x kg(-1) x min(-1) (P < 0.05). In all groups, the net hepatic glucose output data were confirmed by the tracer-determined glucose production data. In the INS group, net hepatic gluconeogenic substrate uptake (alanine, glutamine, glutamate, glycerol, glycine, lactate, threonine, and serine) fell slightly (10.4 +/- 1.3 [basal] to 7.2 +/- 1.3 micromol x kg(-1) x min(-1) [last 30 min]), whereas in the INS + FAT group it did not change (7.3 +/- 1.5 [basal] to 7.4 +/- 0.6 micromol x kg(-1) x min(-1) [last 30 min]), and in the control group it increased slightly (9.6 +/- 1.3 [basal] to 10.3 +/- 1.4 micromol x kg(-1) x min(-1) [last 30 min). These results indicate that peripheral insulin's ability to regulate hepatic glucose production is partially linked to its inhibition of lipolysis. When plasma NEFA levels were prevented from falling during a selective arterial hyperinsulinemia, approximately 55% of insulin's inhibition of net hepatic glucose output (NHGO) was eliminated. The fall in NEFA levels brings about a redirection of glycogenolytically derived carbon within the hepatocyte such that there is an increase in lactate efflux and a corresponding decrease in NHGO.