In mammals, insulin signalling regulates glucose transport together with the expression and activity of various metabolic enzymes. In the nematode Caenorhabditis elegans, a related pathway regulates metabolism, development and longevity. Wild-type animals enter the developmentally arrested dauer stage in response to high levels of a secreted pheromone, accumulating large amounts of fat in their intestines and hypodermis. Mutants in DAF-2 (a homologue of the mammalian insulin receptor) and AGE-1 (a homologue of the catalytic subunit of mammalian phosphatidylinositol 3-OH kinase) arrest development at the dauer stage. Moreover, animals bearing weak or temperature-sensitive mutations in daf-2 and age-1 can develop reproductively, but nevertheless show increased energy storage and longevity. Here we show that null mutations in daf-16 suppress the effects of mutations in daf-2 or age-1; lack of daf-16 bypasses the need for this insulin receptor-like signalling pathway. The principal role of DAF-2/AGE-1 signalling is thus to antagonize DAF-16. daf-16 is widely expressed and encodes three members of the Fork head family of transcription factors. The DAF-2 pathway acts synergistically with the pathway activated by a nematode TGF-beta-type signal, DAF-7, suggesting that DAF-16 cooperates with nematode SMAD proteins in regulating the transcription of key metabolic and developmental control genes. The probable human orthologues of DAF-16, FKHR and AFX, may also act downstream of insulin signalling and cooperate with TGF-beta effectors in mediating metabolic regulation. These genes may be dysregulated in diabetes.