Abstract During embryogenesis, an essential process known as dosage compensation is initiated to equalize gene expression from sex chromosomes. Although much is known about how dosage compensation is established, the consequences of modulating the stability of dosage compensation postembryonically are not known. Here we define a role for the Caenorhabditis elegans dosage compensation complex (DCC) in the regulation of DAF-2 insulin-like signaling. In a screen for dauer regulatory genes that control the activity of the FoxO transcription factor DAF-16, we isolated three mutant alleles of dpy-21, which encodes a conserved DCC component. Knockdown of multiple DCC components in hermaphrodite and male animals indicates that the dauer suppression phenotype of dpy-21 mutants is due to a defect in dosage compensation per se. In dpy-21 mutants, expression of several X-linked genes that promote dauer bypass is elevated, including four genes encoding components of the DAF-2 insulin-like pathway that antagonize DAF-16/FoxO activity. Accordingly, dpy-21 mutation reduced the expression of DAF-16/FoxO target genes by promoting the exclusion of DAF-16/FoxO from nuclei. Thus, dosage compensation enhances dauer arrest by repressing X-linked genes that promote reproductive development through the inhibition of DAF-16/FoxO nuclear translocation. This work is the first to establish a specific postembryonic function for dosage compensation in any organism. The influence of dosage compensation on dauer arrest, a larval developmental fate governed by the integration of multiple environmental inputs and signaling outputs, suggests that the dosage compensation machinery may respond to external cues by modulating signaling pathways through chromosome-wide regulation of gene expression.