Abstract: In addition to obesity, many factors, including the distribution of body fat, contribute to the development of insulin resistance and type 2 diabetes mellitus (T2DM). Lipid contained within skeletal muscle as triglyceride is a parameter of regional fat accumulation thought to be an important link among obesity, insulin resistance, and type 2 diabetes, even in the pediatric population. Intramuscular triglycerides can also be a fuel source for healthy muscle during periods of physical activity. Thus, the balance between storage and efficient utilization of muscle triglycerides is likely a key to a better understanding of the interaction between dysregulated fat and glucose metabolism by muscle in both adults and children. This review examines the evidence that muscle lipid accumulation is linked with insulin resistance and type 2 diabetes of both adults and children. In addition, we explore the potential mechanisms for muscle lipid accumulation as well as the effects of weight loss and physical activity on muscle lipid. Further defining the links between muscle lipid accumulation and insulin action should help develop more effective strategies to prevent or treat type 2 diabetes and other obesity-associated disorders.