Currently, we observe an epidemic expansion of diabetes mellitus. In subjects with Type 2 diabetes the resistance of fat, muscle and liver to insulin is the central pathophysiological event in the development of this disease. Genetic and environmental factors play a major role in this process, although the precise pathogenesis of insulin resistance and Type 2 diabetes is still largely unknown. However, recent studies have contributed to a deeper understanding of the molecular mechanisms underlying this process. In this review we therefore summarize the current developments in understanding the pathophysiological process of insulin resistance and Type 2 diabetes. Among the many molecules involved in the intracellular processing of the signal provided by insulin, insulin receptor substrate (IRS)-2, the protein kinase B (PKB)-β isoform and the forkhead transcription factor Foxo1a (FKHR) are of particular interest in this context as recent data have provided strong evidence that dysfunction of these proteins results in insulin resistance in-vivo. Furthermore, we have now increasing evidence that the adipose tissue not only produces free fatty acids that contribute to insulin resistance, but also acts as a relevant endocrine organ producing mediators (adipokines) that can modulate insulin signalling. The identification of the molecular pathophysiological mechanisms of insulin resistance and Type 2 diabetes is essential for the development of novel and more effective therapies to better treat our patients with insulin resistance and Type 2 diabetes.