Obesity is a major risk factor for several diseases including diabetes, heart disease, and some forms of cancer and due to its rapidly increasing prevalence it has become one of the biggest problems medicine is facing today. All the more surprising, a substantial percentage of obese patients are metabolically healthy when classified based on insulin resistance and systemic inflammation. Oxysterols are naturally occurring molecules that play important role in various metabolic and inflammatory processes and their levels are elevated in patients suffering from obesity and diabetes. 25-Hydroxycholesterol (25-OHC) is produced in cells from cholesterol by the enzyme cholesterol 25-hydroxylase (Ch25h) and is involved in lipid metabolism, inflammatory processes, and cell proliferation. Here, we investigated the role of hepatic Ch25h in the transition from metabolically healthy obesity to insulin resistance and diabetes. Using several different experimental approaches, we demonstrated the significance of Ch25h on the border of “healthy” and “diseased” states of obesity. Adenovirus-mediated Ch25h overexpression in mice improved glucose tolerance and insulin sensitivity and lowered HOMA-IR. Our data suggest that low hepatic Ch25h levels could be considered a risk marker for unhealthy obesity.