The epidemic of type 2 diabetes (T2DM) is a public health problem that threatens to spiral out of control in the twenty-first century. Early intervention can greatly mitigate the serious socioeconomic impact of the disease, driven largely by disabling microvascular complications and cardiovascular disease. Obesity is at the core of the epidemic of T2DM, affecting 2/3 of adults and reaching alarming rates in children in modern society. Our understanding of adipose tissue has evolved drastically in the past decade being now viewed as a dynamic ‘endocrine organ’ responsible for the development or worsening of insulin resistance and ‘lipotoxicity’ in obese individuals. ‘Lipotoxicity’ describes the damage that occurs when chronic energy supply exceeds metabolic needs and lipid accumulates in tissues that would not normally store large amounts of lipid. In this setting, lipid is redirected into harmful pathways of nonoxidative metabolism, with accumulation of toxic metabolites that activate inflammatory pathways and eventually lead to apoptosis. It affects organs responsible for maintaining normal energy homeostasis, such as the liver, skeletal muscle, and pancreatic beta-cells, but also the vascular bed. The ability of fatty acids to disrupt insulin signaling and how the mitochondria adapts to chronic lipid overload are essential steps in understanding FFA-induced insulin resistance and lipotoxicity across different tissues. Interventions that may prevent lipotoxicity in different target tissues, but in particularpancreatic beta-cell lipotoxicity, such as exercise, weight loss, and/or pharmacological therapies such as thiazolidinediones, hold the key to prevent diabetes in subjects genetically predisposed to T2DM and tackle the looming epidemic of the coming century.