TUG tethering proteins bind and sequester GLUT4 glucose transporters intracellularly, and insulin stimulates TUG cleavage to translocate GLUT4 to the cell surface and increase glucose uptake. This effect of insulin is independent of phosphatidylinositol 3-kinase, and its physiological relevance remains uncertain. Here we show that this TUG cleavage pathway regulates both insulin-stimulated glucose uptake in muscle and organism-level energy expenditure. Using mice with muscle-specific Tug (Aspscr1)-knockout and muscle-specific constitutive TUG cleavage, we show that, after GLUT4 release, the TUG C-terminal cleavage product enters the nucleus, binds peroxisome proliferator-activated receptor (PPAR)γ and its coactivator PGC-1α and regulates gene expression to promote lipid oxidation and thermogenesis. This pathway acts in muscle and adipose cells to upregulate sarcolipin and uncoupling protein 1 (UCP1), respectively. The PPARγ2 Pro12Ala polymorphism, which reduces diabetes risk, enhances TUG binding. The ATE1 arginyltransferase, which mediates a specific protein degradation pathway and controls thermogenesis, regulates the stability of the TUG product. We conclude that insulin-stimulated TUG cleavage coordinates whole-body energy expenditure with glucose uptake, that this mechanism might contribute to the thermic effect of food and that its attenuation could promote obesity.