The molecular mechanisms involved in the development of obesity and related complications remain unclear. Here, we report that obese mice and human subjects have increased activity of neutrophil elastase (NE) and decreased serum levels of the NE inhibitor α1-antitrypsin (A1AT, SerpinA1). NE null (Ela2-/-) mice and A1AT transgenic mice were resistant to high-fat diet (HFD)-induced body weight gain, insulin resistance, inflammation, and fatty liver. NE inhibitor GW311616A reversed insulin resistance and body weight gain in HFD-fed mice. Ela2-/- mice also augmented circulating high molecular weight (HMW) adiponectin levels, phosphorylation of AMP-activated protein kinase (AMPK), and fatty acid oxidation (FAO) in the liver and brown adipose tissue (BAT) and uncoupling protein (UCP1) levels in the BAT. These data suggest that the A1AT-NE system regulates AMPK signaling, FAO, and energy expenditure. The imbalance between A1AT and NE contributes to the development of obesity and related inflammation, insulin resistance, and liver steatosis.