The effects of heparin-induced non-esterified free fatty acid (NEFA) release on insulin sensitivity index were studied in individuals with varying degrees of glucose intolerance and beta cell dysfunction during the frequently sampled intravenous glucose tolerance test (IVGTT). The groups comprised: Group 1 (n = 5): newly diagnosed Type 2 diabetic patients, Group 2 (n = 11): impaired glucose tolerance patients (IGT), and Group 3 (n = 16): healthy normal glucose tolerance subjects. The serum insulin and c-peptide levels were severely blunted in the diabetic patients when compared to both non-diabetic groups. Mean fasting and post-heparin plasma NEFA levels were approximately 1.8 fold greater (p < 0.05) in the diabetic patients when compared to the other two groups. The mean insulin sensitivity index was lowest in the diabetic patients, intermediate in the IGT patients, and highest in the healthy controls. A significant negative relationship was found between the insulin sensitivity index and stimulated NEFA (r = -0.537, p < 0.008) but not with the fasting NEFA levels in our subjects. In summary, the frequently sampled IVGTT protocol that employs heparin flushes results in marked elevations in NEFA in Type 2 diabetic patients with poor beta cell dysfunction but not in subjects with intermediate or normal glucose tolerance. The higher plasma NEFA levels during heparin injections could worsen the model-derived, insulin sensitivity index and could impair the ability to achieve an acceptable modelling in Type 2 diabetic patients. We therefore suggest heparin should be avoided in such patients when using this protocol.