Abstract: The composition and biochemistry of skeletal muscle are altered in obesity and type 2 diabetes mellitus (DM) as compared to nonobese individuals. In health, skeletal muscle has a clear capacity to utilize both carbohydrate and lipid fuels and to transition between these in response to hormonal, chiefly insulin, and substrate signals. This metabolic flexibility is key for the major role that skeletal muscle can have in overall fuel balance. In obesity and type 2 DM, there is a loss of this plasticity and, instead, there is metabolic inflexibility. Rates of lipid oxidation do not suppress effectively in response to insulin, but neither do rates of lipid oxidation effectively increase during the transition to fasting conditions. An important morphological characteristic of skeletal muscle in obesity and type 2 DM is an increased content of triglyceride. The accretion of fat within muscle tissues appears to strongly correlate with insulin resistance and may not be simply a passive process, paralleling fat storage in other tissues. Instead, and of particular metabolic interest, a concept is emerging that biochemical characteristics of skeletal muscle in obese individuals dispose to fat accumulation in muscle. An effort to modify skeletal muscle in individuals with obesity and type 2 DM so that the capacity for fat oxidation and metabolic flexibility is improved should be among the goals of treatment for these disorders.