Obesity disrupts homeostatic energy balance circuits leading to insulin resistance. Here we examined in vivo peripheral and central insulin sensitivity, and whether central insensitivity in terms of the voluntary food intake (VFI) response occurs within the hypothalamus or at blood-brain transfer level, during obesity and after subsequent weight loss. Sheep with intracerebroventricular (icv) cannulae were fed complete diet for 40 wk ad libitum (obese group) or at control level (controls). Thereafter, obese sheep were food restricted (slimmers) and controls fed ad libitum (fatteners) for 16 wk. Dual-energy x-ray absorptiometry (DEXA) measured total body fat, insulin analyses in blood and cerebrospinal fluid (CSF) assessed blood-brain transfer, iv glucose tolerance test (GTT) and insulin tolerance test (ITT) measured peripheral insulin sensitivity, and VFI responses to icv insulin assessed intrahypothalamic sensitivity. Insulinemia was higher in obese than controls; plasma insulin correlated with DEXA body fat and CSF insulin. Insulinemia was higher in fatteners than slimmers but ratio of CSF to plasma insulin correlated only in fatteners. Plasma glucose baseline and area under the curve were higher during GTT and ITT in obese than controls and during ITT in fatteners than slimmers. GTT and ITT glucose area under the curve correlated with DEXA body fat. VFI decreased after icv insulin, with response magnitude correlating negatively with DEXA body fat. Overall, insulin resistance developed first in the periphery and then within the brain, thereafter correlating with adiposity; central resistance in terms of VFI response resulted from intrahypothalamic insensitivity rather than impaired blood-brain transfer; modest weight loss improved peripheral but not central insulin sensitivity and induced central hypoinsulinemia.