Human genetics has been instrumental in identification of genetic variants linked to type 2 diabetes. Recently a rare, putative loss-of-function mutation in the orphan G-protein coupled receptor 151 (GPR151) was found to be associated with lower odds ratio for type 2 diabetes, but the mechanism behind this association has remained elusive. Here we show that Gpr151 is a fasting- and glucagon-responsive hepatic gene which regulates hepatic gluconeogenesis. Gpr151 ablation in mice leads to suppression of hepatic gluconeogenesis genes and reduced hepatic glucose production in response to pyruvate. Importantly, the restoration of hepatic Gpr151 levels in the Gpr151 knockout mice reverses the reduced hepatic glucose production. In this work, we establish a previously unknown role of Gpr151 in the liver that provides an explanation to the lowered type 2 diabetes risk in individuals with nonsynonymous mutations in GPR151.