Low plasma sex hormone-binding globulin (SHBG) levels are associated with obesity and predict the development of type 2 diabetes. The reason why obese individuals have low circulating SHBG has been attributed to hyperinsulinemia, but no mechanistic evidence has been described. The aim of the current study is to explore whether tumor necrosis factor-α (TNF-α) rather than insulin could be the main factor accounting for low SHBG levels in obesity. We performed in vitro and in vivo studies using human HepG2 cells and human SHBG transgenic mice. In addition, a cross-sectional study to explore the relationship between TNF-α and SHBG in obese patients and an interventional study to examine the effect of insulin administration on circulating SHBG in type 2 diabetic patients were performed. We provide evidence that TNF-α, but not insulin, is the main factor by which SHBG is reduced in obesity. Plasma SHBG was significantly increased rather than decreased after insulin treatment in diabetic patients. TNF-α-induced reduction of SHBG expression was mediated by downregulating HNF4A. Finally, a negative and independent correlation was found between plasma TNF-α receptor 1 and SHBG levels in obese patients. Our results suggest that TNF-α plays an important role downregulating SHBG in chronic low-grade inflammatory diseases such as obesity and type 2 diabetes. © 2012 by the American Diabetes Association.