There is interest in how altered lipid metabolism could contribute to muscle insulin resistance. Many animal and human states of insulin resistance have increased muscle triglyceride content, and there are now plausible mechanistic links between muscle lipid accumulation and insulin resistance, which go beyond the classic glucose–fatty acid cycle. We postulate that muscle cytosolic accumulation of the metabolically active long-chain fatty acyl CoAs (LCACoA) is involved, leading to insulin resistance and impaired insulin signalling or impaired enzyme activity (e.g. glycogen synthase or hexokinase) either directly or via chronic translocation/activation of mediators such as a protein kinase C (particularly PKC θ and ɛ). Ceramides and diacylglycerols (DAGs) have also been implicated in forms of lipid-induced muscle insulin resistance. Dietary lipid-induced muscle insulin resistance in rodents is relatively easily reversed by manipulations that lessen cytosolic lipid accumulation (e.g. diet change, exercise or fasting). PPAR agonists (both γ and α) also lower muscle LCACoA and enhance insulin sensitivity. Activation of AMP-activated protein kinase (AMPK) by AICAR leads to muscle enhancement (especially glycolytic muscle) of insulin sensitivity, but involvement of altered lipid metabolism is less clear cut. In rodents there are similarities in the pattern of muscle lipid accumulation/PKC translocation/altered insulin signalling/insulin resistance inducible by 3–5-h acute free fatty acid elevation, 1–4 days intravenous glucose infusion or several weeks of high-fat feeding. Recent studies extend findings and show relevance to humans. Muscle cytosolic lipids may accumulate either by increased fatty acid flux into muscle, or by reduced fatty acid oxidation. In some circumstances muscle insulin resistance may be an adaptation to optimize use of fatty acids when they are the predominant available energy fuel. The interactions described here are fundamental to optimizing therapy of insulin resistance based on alterations in muscle lipid metabolism.