Ketogenic diets have been used as an approach to weight loss based on the theoretical advantage of a low carbohydrate, high fat diet. To evaluate the physiologic and metabolic effects of such diets on weight we studied mice consuming a very low carbohydrate, ketogenic diet (KD). This diet had profound effects on energy balance and gene expression. C57BL/6 mice animals were fed one of four diets, KD, a commonly used obesogenic high fat high/sucrose diet (HF), 66% caloric restriction (CR) and control chow (C). KD ate the same calories as C and HF but weight dropped and stabilized at 85% initial weight, similar to CR. This was consistent with increased energy expenditure seen in animals fed KD vs C and CR. Microarray analysis of livers revealed a unique pattern of gene expression in KD, with increased expression of genes in fatty acid oxidation pathways and reduction in lipid synthesis pathways. Animals made obese on HF and transitioned to KD lost all excess body weight, improved glucose tolerance and increased energy expenditure. Analysis of key genes showed similar changes as those seen in lean animals placed directly on KD. Additionally, AMP Kinase activity was increased, with a corresponding decrease in ACC activity. These data indicate that KD induces a unique metabolic state associated with increased energy expenditure and congruous with weight loss.