A key phenotype associated with type 2 diabetes in humans is impaired mitochondrial oxidative metabolism in skeletal muscle, a pattern potentially contributing to increased lipid accumulation and impaired metabolic flexibility-in turn, central features of both insulin resistance and diabetes. Since thyroid hormone regulates mitochondrial gene expression and function in skeletal muscle, reductions in T3-mediated transcription may contribute to diabetes-related impairments in oxidative metabolism. We review the evidence for relationships between thyroid hormone action and diabetes risk, and discuss potential mechanisms linking intracellular thyroid hormone availability, thyroid receptor action, and the transcriptional coactivator PGC1 in regulating oxidative metabolism.