sn-1,2-diacylglycerol (sn-1,2-DAG)-mediated activation of protein kinase Cε (PKCε) is a key pathway that is responsible for obesity-related lipid metabolism disorders, which induces hepatic insulin resistance and type 2 diabetes. No small molecules have been previously reported to ameliorate these diseases through this pathway. Here, we screened and identified the phytochemical atractylenolide II (AT II) that reduces the hepatic sn-1,2-DAG levels, deactivates PKCε activity, and improves obesity-induced hyperlipidemia, hepatosteatosis, and insulin resistance. Furthermore, using the ABPP strategy, the diacylglycerol kinase family member DGKQ was identified as a direct target of AT II. AT II may act on a novel drug-binding pocket in the CRD and PH domains of DGKQ to thereby allosterically regulate its kinase activity. Moreover, AT II also increases weight loss by activating DGKQ-AMPK-PGC1α-UCP-1 signaling in adipose tissue. These findings suggest that AT II is a promising lead compound to improve obesity-induced insulin resistance.