Roux-en-Y gastric bypass (RYGB) is highly effective in reversing obesity and associated diabetes. Recent observations in humans suggest a contributing role of increased circulating bile acids in mediating such effects. Here we use a diet-induced obesity (DIO) mouse model and compare metabolic remission when bile flow is diverted through a gallbladder anastomosis to jejunum, ileum or duodenum (sham control). We find that only bile diversion to the ileum results in physiologic changes similar to RYGB, including sustained improvements in weight, glucose tolerance and hepatic steatosis despite differential effects on hepatic gene expression. Circulating free fatty acids and triglycerides decrease while bile acids increase, particularly conjugated tauro-β-muricholic acid, an FXR antagonist. Activity of the hepatic FXR/FGF15 signalling axis is reduced and associated with altered gut microbiota. Thus bile diversion, independent of surgical rearrangement of the gastrointestinal tract, imparts significant weight loss accompanied by improved glucose and lipid homeostasis that are hallmarks of RYGB.