Excess reactive oxygen species (ROS) generation and inflammation may contribute to obesity-associated skeletal muscle insulin resistance. Ghrelin is a gastric hormone whose unacylated form (UnAG) is associated with whole-body insulin sensitivity in humans and may reduce oxidative stress in nonmuscle cells in vitro. We hypothesized that UnAG 1) lowers muscle ROS production and inflammation and enhances tissue insulin action in lean rats and 2) prevents muscle metabolic alterations and normalizes insulin resistance and hyperglycemia in high-fat diet (HFD)–induced obesity. In 12-week-old lean rats, UnAG (4-day, twice-daily subcutaneous 200-µg injections) reduced gastrocnemius mitochondrial ROS generation and inflammatory cytokines while enhancing AKT-dependent signaling and insulin-stimulated glucose uptake. In HFD-treated mice, chronic UnAG overexpression prevented obesity-associated hyperglycemia and whole-body insulin resistance (insulin tolerance test) as well as muscle oxidative stress, inflammation, and altered insulin signaling. In myotubes, UnAG consistently lowered mitochondrial ROS production and enhanced insulin signaling, whereas UnAG effects were prevented by small interfering RNA–mediated silencing of the autophagy mediator ATG5. Thus, UnAG lowers mitochondrial ROS production and inflammation while enhancing insulin action in rodent skeletal muscle. In HFD-induced obesity, these effects prevent hyperglycemia and insulin resistance. Stimulated muscle autophagy could contribute to UnAG activities. These findings support UnAG as a therapeutic strategy for obesity-associated metabolic alterations.