Metformin is the leading drug for treating type 2 diabetics, but the mechanism of action of metformin, despite some suggested mechanisms such as the activation of the AMP-kinase, is largely unknown. Among its many positive effects are the reduction of blood glucose levels, the inhibition of cyclic AMP synthesis, gluconeogenesis and an increase in sensitivity to insulin. Recent studies have described the natural antagonist of cyclic AMP, prostaglandylinositol cyclic phosphate. Synthesis of cyclic PIP is stimulated in all organs by hormones such as insulin and also by drugs such as metformin. Its primary action is to trigger the dephosphorylation of proteins/enzymes, phosphorylated on serine/threonine residues. Cyclic PIP triggers many of the regulations requested by insulin. The parallels between the beneficial effects of metformin and the regulations triggered by cyclic PIP suggest that the mechanism of action of this key drug may well be explained by its stimulation of the synthesis of cyclic PIP.