OBJECTIVE Recent data suggested that sex hormone–binding globulin (SHBG) levels decrease when fat accumulates in the liver and that circulating SHBG may be causally involved in the pathogenesis of type 2 diabetes in humans. In the present study, we investigated mechanisms by which high SHBG may prevent development to diabetes. RESEARCH DESIGN AND METHODS Before and during a 9-month lifestyle intervention, total body and visceral fat were precisely measured by magnetic resonance (MR) tomography and liver fat was measured by 1H-MR spectroscopy in 225 subjects. Insulin sensitivity was estimated from a 75-g oral glucose tolerance test (ISOGTT) and measured by a euglycemic hyperinsulinemic clamp (ISclamp, n = 172). Insulin secretion was measured during the OGTT and an ivGTT (n = 172). RESULTS SHBG levels correlated positively with insulin sensitivity (ISOGTT, P = 0.037; ISclamp, P = 0.057), independently of age, sex, and total body fat. In a multivariate model, these relationships were also significant after additional adjustment for levels of the adipokine adiponectin and the hepatokine fetuin-A (ISOGTT, P = 0.0096; ISclamp, P = 0.029). Adjustment of circulating SHBG for liver fat abolished the relationships of SHBG with insulin sensitivity. In contrast, circulating SHBG correlated negatively with fasting glycemia, before (r = −0.17, P = 0.009) and after (r = −0.14, P = 0.04) adjustment for liver fat. No correlation of circulating SHBG with adjusted insulin secretion was observed (OGTT, P = 0.16; ivGTT, P = 0.35). The SNP rs1799941 in SHBG was associated with circulating SHBG (P ≤ 0.025) but not with metabolic characteristics (all P > 0.18). CONCLUSIONS Possible mechanisms by which high circulating SHBG prevents the development of type 2 diabetes involve regulation of fasting glycemia but not alteration of insulin secretory function.