Aldo-keto reductase 1B7 (AKR1B7) is proposed to play a role in detoxification of by-products of lipid peroxidation. In this article, we show that activation of the nuclear receptor farnesoid X receptor (FXR) induces AKR1B7 expression in the liver and intestine, and reduces the levels of malondialdehyde (MDA), the end product of lipid peroxidation, in the intestine but not in the liver. To determine whether AKR1B7 regulates MDA levels in vivo, we overexpressed AKR1B7 in the liver. Overexpression of AKR1B7 in the liver had no effect on hepatic or plasma MDA levels. Interestingly, hepatic expression of AKR1B7 significantly lowered plasma glucose levels in both wild-type and diabetic db/db mice, which was associated with reduced hepatic gluconeogenesis. Hepatic expression of AKR1B7 also significantly lowered hepatic triglyceride and cholesterol levels in db/db mice. These data reveal a novel function for AKR1B7 in lipid and glucose metabolism and suggest that AKR1B7 may not play a role in detoxification of lipid peroxides in the liver. AKR1B7 may be a therapeutic target for treatment of fatty liver disease associated with diabetes mellitus.