Insulin resistance associated with Type 2 diabetes contributes to impaired vasorelaxation. Previously, we showed the phosphorylation of myosin-bound phosphatase substrate MYPT1, a marker of the vascular smooth muscle cell (VSMC) contraction, was negatively regulated by Akt (protein kinase B) phosphorylation in response to insulin stimulation. In this study we examined the role of Akt phosphorylation on impaired insulin-induced vasodilation in the Goto-Kakizaki (GK) rat model of Type 2 diabetes. GK VSMCs had impaired basal and insulin-induced Akt phosphorylation as well as increases in basal MYPT1 phosphorylation, inducible nitric oxide synthase (iNOS) expression, and nitrite/nitrate production compared with Wistar-Kyoto controls. Both iNOS expression and the inhibition of angiotensin (ANG) II-induced MYPT1 phosphorylation were resistant to the effects of insulin in diabetic GK VSMC. We also measured the isometric tension of intact and denuded GK aorta using a myograph and observed significantly impaired insulin-induced vasodilation. Adenovirus-mediated overexpression of constitutively active Akt in GK VSMC led to significantly improved insulin sensitivity in terms of counteracting ANG II-induced contractile signaling via MYPT1, myosin light chain dephosphorylation, and reduced iNOS expression, S-nitrosylation and survivin expression. We demonstrated for the first time the presence of Akt-independent iNOS expression in the GK diabetic model and that the defective insulin-induced vasodilation observed in the diabetic vasculature can be restored by the overexpression of active Akt, which advocates a novel therapeutic strategy for treating diabetes.