SIRT1 is a member of the sirtuin family of NAD+-dependent deacetylases, which couple cellular metabolism to systemic physiology. Although studies in mouse models have defined a central role for SIRT1 in maintaining metabolic health, the molecular mechanisms remain unclear. Here we show that loss of the Drosophila SIRT1 homolog sir2 leads to the age-progressive onset of hyperglycemia, obesity, glucose intolerance, and insulin resistance. Tissue-specific functional studies show that Sir2 is both necessary and sufficient in the fat body (analogous to the mammalian liver) to maintain glucose homeostasis and peripheral insulin sensitivity. Transcriptional profiling of sir2 mutants by RNA-seq revealed a major overlap with genes regulated by the nuclear receptor Hepatocyte Nuclear Factor 4 (HNF4). Consistent with this, Drosophila HNF4 mutants display diabetic phenotypes similar to those of sir2 mutants, and protein levels for dHNF4 are reduced in sir2 mutant animals. We show that Sir2 exerts these effects by deacetylating and stabilizing dHNF4 through protein interactions. Increasing dHNF4 expression in sir2 mutants is sufficient to rescue their insulin signaling defects, defining this nuclear receptor as an important downstream effector of Sir2 signaling. This study demonstrates that the key metabolic activities of SIRT1 have been conserved through evolution, provides a genetic model for functional studies of phenotypes related to type 2 diabetes, and establishes HNF4 as a critical downstream target by which Sir2 maintains metabolic health.