We investigate the metal-insulator transition driven by the onsite repulsive interaction $U$ in an altermagnetic Hubbard model defined on a Lieb lattice. Using the slave-rotor approach at half filling, we find that the system exhibits a cascade of interaction-driven phase transitions. As $U$ increases, the system evolves from a normal metal to an altermagnetic metal, then to an altermagnetic insulator, and eventually to an altermagnetic Mott insulator characterized by the complete suppression of the quasiparticle weight. These phases are supported by the calculation of the electronic spectral function, which features spin-split bands in both the metallic and insulating regimes. However, the spin splitting becomes substantially suppressed in the Mott insulating phase. Our results suggest that the observation of spin splitting in the spectral function of $d$-wave altermagnets with a Lieb-lattice-like structure may be limited to the weak-to-moderate correlation regime.