It is widely believed that inflammation associated with obesity has an important role in the development of type 2 diabetes. IκB kinase beta (IKKβ) is a crucial kinase that responds to inflammatory stimuli such as tumor necrosis factor α (TNF-α) by initiating a variety of intracellular signaling cascades and is considered to be a key element in the inflammation-mediated development of insulin resistance. We show here, contrary to expectation, that IKKβ-mediated inflammation is a positive regulator of hepatic glucose homeostasis. IKKβ phosphorylates the spliced form of X-Box Binding Protein 1 (XBP1s) and increases the activity of XBP1s. We have used three experimental approaches to enhance the IKKβ activity in the liver of obese mice and observed increased XBP1s activity, reduced ER stress, and a significant improvement in insulin sensitivity and consequently in glucose homeostasis. Our results reveal a beneficial role of IKKβ-mediated hepatic inflammation in glucose homeostasis.