Estrogen sulfotransferase (EST), the enzyme responsible for the sulfonation and inactivation of estrogens, plays an important role in estrogen homeostasis. In this study, we showed that induction of hepatic Est is a common feature of type 2 diabetes. Loss of Est in female mice improved metabolic function in ob/ob, dexamethasone-, and high-fat diet-induced mouse models of type 2 diabetes. The metabolic benefit of Est ablation included improved body composition, increased energy expenditure and insulin sensitivity, and decreased hepatic gluconeogenesis and lipogenesis. This metabolic benefit appeared to have resulted from decreased estrogen deprivation and increased estrogenic activity in the liver, whereas such benefit was abolished in ovariectomized mice. Interestingly, the effect of Est was sex-specific, as Est ablation in ob/ob males exacerbated the diabetic phenotype, which was accounted for by the decreased islet β-cell mass and failure of glucose-stimulated insulin secretion in vivo. The loss of β-cell mass in ob/ob males deficient in Est was associated with increased macrophage infiltration and inflammation in white adipose tissue. Our results revealed an essential role of EST in energy metabolism and the pathogenesis of type 2 diabetes. Inhibition of EST, at least in females, may represent a novel approach to manage type 2 diabetes.