In humans and rodents, risk of metabolic syndrome is sexually dimorphic, with an increased incidence in males. Additionally, the protective role of female gonadal hormones is ostensible, as prevalence of type 2 diabetes mellitus (T2DM) increases after menopause. Here, we investigated the influence of estrogen (E2) on the onset of T2DM in female New Zealand obese (NZO) mice. Diabetes prevalence (defined as blood glucose levels >16.6 mmol/l) of NZO females on high-fat diet (60 kcal% fat) in week 22 was 43%. This was markedly dependent on liver fat content in week 10, as detected by computed tomography. Only mice with a liver fat content >9% in week 10 plus glucose levels >10 mmol/l in week 9 developed hyperglycemia by week 22. In addition, at 11 wk, diacylglycerols were elevated in livers of diabetes-prone mice compared with controls. Hepatic expression profiles obtained from diabetes-prone and -resistant mice at 11 wk revealed increased abundance of two transcripts in diabetes-prone mice: Mogat1, which catalyzes the synthesis of diacylglycerols from monoacylglycerol and fatty acyl-CoA, and the fatty acid transporter Cd36. E2 treatment of diabetes-prone mice for 10 wk prevented any further increase in liver fat content and reduced diacylglycerols and the abundance of Mogat1 and Cd36, leading to a reduction of diabetes prevalence and an improved glucose tolerance compared with untreated mice. Our data indicate that early elevation of hepatic Cd36 and Mogat1 associates with increased production and accumulation of triglycerides and diacylglycerols, presumably resulting in reduced hepatic insulin sensitivity and leading to later onset of T2DM.