The precise role of circulating IGF-I in somatic growth under normal and growth hormone (GH) deficient conditions remains unclear. To define the contribution of circulating IGF-I to the endocrine regulation of somatic growth and the GH/IGF-I axis, we constructed a transgene with the transthyretin (TTR) enhancer/promoter and the mouse IGF-I cDNA and generated TTR-IGF-I transgenic mice. The transgene was exclusively expressed in the liver, which resulted in a 50% to 60% increase in serum IGF-I, a decrease in serum GH and an improved tolerance to glucose challenge. The body weight and lean mass of TTR-IGF-I mice were heavier compared with wild-type (WT) mice. The increase in lean mass was due to increase in both number and thickness of skeletal muscle fibers. The femur, tibia and body lengths of TTR-IGF-I mice also were longer. In WT mice, the GH antagonist pegvisomant (Peg) suppressed the transcription of endogenous IGF-I and acid labile subunit (ALS) genes with no effect on IGF binding protein 3 (IGFBP-3) mRNA. Consequently, Peg-induced GH deficiency in WT mice severely reduced ALS, IGF-I and IGFBP-3 in the circulation and caused a severe growth deficit. In TTR-IGF-I mice, Peg reduced the mRNA of the endogenous IGF-I gene with no effect on the TTR-IGF-I transgene expression, leading to a blunted decrease in serum IGF-I levels. Interestingly, IGFBP-3 mRNA was elevated and circulating IGFBP-3 was less reduced in Peg-treated TTR-IGF-I mice. Peg-treated TTR-IGF-I mice also exhibited heavier body weight and longer body length than Peg-treated WT mice. Therefore, liver-expressed IGF-I can stimulate IGFBP-3 mRNA expression and stabilize IGFBP-3 under GH deficiency, leading to a better maintenance of IGF-I levels in the circulation. Higher circulating levels of IGF-I can stimulate somatic growth, lean mass and improve glucose tolerance.