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A complex sequence of steps is required for insulin to cause glucose uptake. Impairment of any one of these steps can contribute to insulin resistance. We observed the effect of insulin resistance induced by hyperlipidemia on the dynamics of insulin injected into skeletal muscle. Basal insulin euglycemic clamps (0.2 mU/min/kg) with or without lipid infusions (20% at 1.5 ml/min) were done on anesthetized dogs. Sequential insulin doses were administered by intramuscular injection directly into the vastus medialis of one hindlimb, using the contralateral leg for comparison. Intramuscular insulin injection in normal animals caused a clear dose-dependent increment in interstitial insulin levels, as well as dose-dependent increase in leg glucose uptake. In a second group of animals, lipid was infused before and during intramuscular insulin injection to cause systemic increase in free fatty acids (FFAs). In sharp contrast, systemic lipid infusion caused insulin resistance, indicated by reduced glucose infusion required to maintain euglycemia, and prevented injection-induced increase in lymphatic insulin and leg glucose uptake observed without lipid. The injected insulin was instead detected in the venous outflow from the leg. Lipid infusion caused intramuscular insulin to be diverted from interstitium into the capillary circulation, preventing a rise in intersitial insulin and any increase in local leg glucose uptake. The diversion of insulin from the interstitium under hyperlipidemic conditions may play a role in the insulin resistance observed coincident with elevated nocturnal FFAs as is observed in obesity.