Evidence, gained from human studies, is reviewed showing that elevation of plasma FFA levels produce peripheral and probably also hepatic insulin resistance in obese healthy and diabetic subjects. First, plasma FFA levels are elevated in most obese subjects. Second, physiological elevations of plasma FFA inhibit acutely as well as chronically insulin stimulated glucose uptake in a dose dependent fashion. Responsible for this inhibition is a FFA induced defect in insulin stimulated glucose transport and/or phosphorylation which develops after 3-4 hours of raising plasma FFA and a second defect, consisting of inhibition of glycogen synthase, the rate limiting enzyme of glycogen synthesis, which develops after 4-6 hours. FFA induced inhibition of fatty acid oxidation (Randle effect) does not affect insulin stimulated glucose uptake or glycogen synthesis and thus does not cause insulin resistance. Elevated plasma FFA levels also modestly increase insulin suppressed endogenous glucose production (EGP) although this effect has not been found by all investigators. The reasons why it has been difficult to demonstrate unequivocal effects of FFA on EGP include 1) the fact that FFA promote insulin secretion which counteracts its effect on EGP (FFA increase, while insulin decreases EGP); 2) the recognition that FFA induced increase in gluconeogenesis may be compensated by intrahepatic downregulation of EGP (i.e., by a decrease in glycogenolysis). The FFA induced insulin resistance is physiologically important during starvation by preserving carbohydrate for oxidation in the central nervous system and during pregnancy, where the well recognized accelerated starvation pattern provides carbohydrate for the growing fetus. In obesity, however, there is no need to spare carbohydrate and the FFA induced insulin resistance may result in type 2 diabetes and other cardiovascular risk factors.