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Objective: Although primarily secreted by the liver, Fibroblast Growth Factor 21 (FGF21) is also expressed in the pancreas, where its function remains unclear. This study aims to elucidate the role of the glucagon‐FGF21 interaction in the metabolic benefits of SGLT2 inhibition (SGLT2i) and hypothesizes it is key to enhancing glucose and lipid metabolism in individuals with glucose intolerance or type 2 diabetes (T2D). Methods: FGF21, FGF1R, and β‐klotho expression in human pancreas was analysed by RNAscope, qPCR and immunofluorescent techniques. Glucose‐stimulated insulin secretion (GSIS) assay was used to investigate the effects of recombinant FGF21 (rFGF21) on islets from donors with glucose intolerance or T2D. To explore the role of the glucagon‐FGF21 axis in the benefits of SGLT2i, we used WT and Sglt2 knockout (KO) mice fed a chow diet (CD) or a high‐fat diet (HFD) and chronically treated with vehicle or dapagliflozin. Results: Chronic rFGF21 treatment enhanced GSIS in islets from donors with glucose intolerance, with increased FGFR1 expression, suggesting FGF21's greater efficacy in the early stages of disease. In diet‐induced insulin‐resistant mice, dapagliflozin reduced postprandial glycaemia and elevated plasma glucagon and FGF21 levels. Sglt2 KO mice on a CD showed increased fasting plasma glucagon without changes in FGF21. In diet‐induced insulin‐resistant Sglt2 KO mice, elevated glucagon and FGF21 levels paralleled chronic dapagliflozin treatment, indicating similar metabolic adaptations in both models. Conclusion: Our findings indicate FGF21 as a crucial mediator in liver‐pancreas crosstalk, improving lipid and glucose metabolism, enhancing pancreatic function, and potentiating the therapeutic efficacy of SGLT2i, thereby representing a target for prediabetes treatment. [ABSTRACT FROM AUTHOR]