Metformin is a first-line drug for the treatment of individuals with type 2 diabetes, yet its precise mechanism of action remains unclear. Metformin exerts its anti-hyperglycemic action primarily through lowering of hepatic glucose production (HGP). This suppression is thought to be mediated through inhibition of mitochondrial respiratory complex I, and thus elevation of 5’-adenosine monophosphate (AMP) levels and the activation of AMP-activated protein kinase (AMPK), though this proposition has been challenged given results in mice lacking hepatic AMPK. Here, we report that the AMP-inhibited enzyme fructose-1,6-bisphosphatase-1 (FBP1, EC 184.108.40.206), a rate-controlling enzyme in gluconeogenesis, functions as a major contributor to the therapeutic action of metformin. We identified a point mutation in FBP1 that renders it insensitive to AMP while sparing regulation by fructose-2,6-bisphosphate (F-2,6-P2) and knockin (KI) of this mutant into mice significantly reduces their response to metformin treatment. We observe this during a metformin tolerance test and in a metformin-euglycemic clamp that we have developed. The anti-hyperglycemic effect of metformin in high fat diet-fed diabetic FBP1 KI mice was also significantly blunted compared to wild-type controls. Collectively, we show a new mechanism of action of metformin, while providing further evidence that molecular targeting of FBP1 can have anti-hyperglycemic effects.