Genome-wide association studies (GWAS) have reproducibly associated variants within introns of FTO with increased risk for obesity and type 2 diabetes (T2D)(1-3). Although the molecular mechanisms linking these noncoding variants with obesity are not immediately obvious, subsequent studies in mice demonstrated that FTO expression levels influence body mass and composition phenotypes(4-6). However, no direct connection between the obesity-associated variants and FTO expression or function has been made(7-9). Here we show that the obesity-associated noncoding sequences within FTO are functionally connected, at megabase distances, with the homeobox gene IRX3. The obesity-associated FTO region directly interacts with the promoters of IRX3 as well as FTO in the human, mouse and zebrafish genomes. Furthermore, long-range enhancers within this region recapitulate aspects of IRX3 expression, suggesting that the obesity-associated interval belongs to the regulatory landscape of IRX3. Consistent with this, obesity-associated single nucleotide polymorphisms are associated with expression of IRX3, but not FTO, in human brains. A direct link between IRX3 expression and regulation of body mass and composition is demonstrated by a reduction in body weight of 25 to 30% in Irx3-deficient mice, primarily through the loss of fat mass and increase in basal metabolic rate with browning of white adipose tissue. Finally, hypothalamic expression of a dominant negative form of Irx3 reproduces the metabolic phenotypes of Irx3 deficient mice. Our data suggest that IRX3 is a functional long-range target of obesity-associated variants within FTO and represents a novel determinant of body mass and composition.