Transforming growth factor‐β superfamily ligands, including activin and myostatin, modulate body composition, islet function, and glucose homeostasis. Their bioactivity is controlled by the antagonists follistatin (FST) and FST like‐3 (FSTL3). The hypothesis tested was that FST and FSTL3 have distinct roles in regulating body composition, glucose homeostasis, and islet function through regulation of activin and myostatin bioactivity. Three genetic mutant mouse lines were created. FSTL3 knockout (FSTL3 KO), a mouse line producing only the FST288 isoform (FST288‐only) and a double mutant (2xM) in which the lines were crossed. FST288‐only males were lighter that wild‐type (WT) littermates while FSTL3 KO and 2xM males had reduced perigonadal fat pad weights. However, only 2xM mice had increased whole body fat mass and decreased lean mass by quantitative nuclear magnetic resonance (qNMR). Fasting glucose levels in FSTL3 WT and KO mice were lower than FST mice in younger animals but were higher in older mice. Serum insulin and pancreatic insulin content in 2xM mice was significantly elevated over other genotypes. Nevertheless, 2xM mice were relatively insulin resistant and glucose intolerant compared to FST288‐only and WT mice. Fractional islet area and proportion of β‐cells/islet were increased in FSTL3 KO and 2xM, but not FST288‐only mice. Despite their larger size, islets from FSTL3 KO and 2xM mice were not functionally enhanced compared to WT mice. These results demonstrate that body composition and glucose homeostasis are differentially regulated by FST and FSTL3 and that their combined loss is associated with increased fat mass and insulin resistance despite elevated insulin production.