Obesity is associated with local tissue hypoxia and elevated hypoxia-inducible factor 1 alpha (HIF-1α) in metabolic tissues. Prolyl hydroxylases (PHDs) play an important role in regulating HIF-α isoform stability. In the present study, we investigated the consequence of whole-body PHD1 gene (Egln2) inactivation on metabolic homeostasis in mice. At baseline, PHD1−/− mice exhibited higher white adipose tissue (WAT) mass, despite lower body weight and impaired insulin sensitivity and glucose tolerance when compared to age-matched wild-type (WT) mice. When fed a synthetic low-fat diet, PHD1−/− mice also exhibit a higher body weight gain and WAT mass along with glucose intolerance and systemic insulin resistance compared to WT mice. PHD1 deficiency led to increase in glycolytic gene expression, lipogenic proteins ACC and FAS, hepatic steatosis and liver-specific insulin resistance. Furthermore, gene markers of inflammation were also increased in the liver, but not in WAT or skeletal muscle, of PHD1−/− mice. As expected, high-fat diet (HFD) promoted obesity, hepatic steatosis, tissue-specific inflammation and systemic insulin resistance in WT mice but these diet-induced metabolic alterations were not exacerbated in PHD1−/− mice. In conclusion, PHD1 deficiency promotes hepatic steatosis and liver-specific insulin resistance but does not worsen the deleterious effects of HFD on metabolic homeostasis.