Dysregulation of endoplasmic reticulum (ER) Ca2+ homeostasis triggers ER stress leading to the development of insulin resistance in obesity and diabetes. Impaired function of the sarco/endoplasmic reticulum Ca2+-ATPase (SERCA) has emerged as a major contributor to ER stress. We pharmacologically activated SERCA2b in a genetic model of insulin resistance and type 2 diabetes (ob/ob mice) with a novel allosteric activator, CDN1163, which markedly lowered fasting blood glucose, improved glucose tolerance, and ameliorated hepatosteatosis but did not alter glucose levels or body weight in lean controls. Importantly, CDN1163-treated ob/ob mice maintained euglycemia comparable with that of lean mice for >6 weeks after cessation of CDN1163 administration. CDN1163-treated ob/ob mice showed a significant reduction in adipose tissue weight with no change in lean mass, assessed by magnetic resonance imaging. They also showed an increase in energy expenditure using indirect calorimetry, which was accompanied by increased expression of uncoupling protein 1 (UCP1) and UCP3 in brown adipose tissue. CDN1163 treatment significantly reduced the hepatic expression of genes involved in gluconeogenesis and lipogenesis, attenuated ER stress response and ER stress-induced apoptosis, and improved mitochondrial biogenesis, possibly through SERCA2-mediated activation of AMP-activated protein kinase pathway. The findings suggest that SERCA2b activation may hold promise as an effective therapy for type-2 diabetes and metabolic dysfunction.