Increased plasma free fatty acid (FFA) level is a hallmark of type 2 diabetes. However, the underlying molecular basis for FFA-caused hyperglycemia remains unclear. Here we identified plasma 5'-adenosine monophosphate (pAMP) markedly elevated in the plasma of type 2 diabetic mice. High levels of FFAs induced damage in vein endothelial cells and contributed to an increase in pAMP. Administration of synthetic 5'-AMP caused hyperglycemia and impaired insulin action in lean wild-type mice. 5'-AMP elevated blood glucose in mice deficient in adenosine receptors with equal efficiency as wild-type mice. The function of pAMP was initiated by the elevation of cellular adenosine levels, directly stimulating G-6-Pase enzyme activity, attenuating insulin-dependent GLUT4 translocation in skeletal muscle, and displaying a rapid and steep increase in blood glucose and a decrease in hepatic glycogen level. It was followed by an increase in the gene expression of hepatic Foxo1 and its targeting gene Pepck and G6Pase, which was similar to diabetic phenotype in db/db mice. Our results suggest that pAMP is a potential upstream regulator of hyperglycemia in type 2 diabetes.