There is now much interest in the mechanisms by which altered lipid metabolism might contribute to insulin resistance as is found in Syndrome X or in Type II diabetes. This review considers recent evidence obtained in animal models and its relevance to humans, and also likely mechanisms and strategies for the onset and amelioration of insulin resistance. A key tissue for development of insulin resistance is skeletal muscle. Animal models of Syndrome X (eg high fat fed rat) exhibit excess accumulation of muscle triglyceride coincident with development of insulin resistance. This seems to also occur in humans and several studies demonstrate increased muscle triglyceride content in insulin resistant states. Recently magnetic resonance spectroscopy has been used to demonstrate that at least some of the lipid accumulation is inside the muscle cell (myocyte). Factors leading to this accumulation are not clear, but it could derive from elevated circulating free fatty acids, basal or postprandial triglycerides, or reduced muscle fatty acid oxidation. Supporting a link with adipose tissue metabolism, there appears to be a close association of muscle and whole body insulin resistance with the degree of abdominal obesity. While causal relationships are still to be clearly established, there are now quite plausible mechanistic links between muscle lipid accumulation and insulin resistance, which go beyond the classic Randle glucose-fatty acid cycle. In animal models, dietary changes or prior exercise which reduce muscle lipid accumulation also improve insulin sensitivity. It is likely that cytosolic accumulation of the active form of lipid in muscle, the long chain fatty acyl CoAs, is involved, leading to altered insulin signalling or enzyme activities (eg glycogen synthase) either directly or via chronic activation of mediators such as protein kinase C. Unless there is significant weight loss, short or medium term dietary manipulation does not alter insulin sensitivity as much in humans as in rodent models, and there is considerable interest in pharmacological intervention. Studies using PPARgamma receptor agonists, the thiazolidinediones, have supported the principle that reduced muscle lipid accumulation is associated with increased insulin sensitivity. Other potent systemic lipid-lowering agents such as PPARalpha receptor agonists (eg fibrates) or antilipolytic agents (eg nicotinic acid analogues) might improve insulin sensitivity but further work is needed, particularly to clarify implications for muscle metabolism. In conclusion, evidence is growing that excess muscle and liver lipid accumulation causes or exacerbates insulin resistance in Syndrome X and in Type II diabetes; development of strategies to prevent this seem very worthwhile.