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A relationship between obesity and type 2 diabetes is now generally well accepted. This relationship represents several major health hazards including morbid obesity and cardiovascular complications worldwide. Diabetes mellitus is a complex metabolic disorder characterized by impaired insulin release and insulin resistance. Lipids play an important physiological role in skeletal muscle, heart, liver and pancreas. Deregulation of fatty acid metabolism is the main culprit for developing insulin resistance and type 2 diabetes. A predominant predisposing factor to developing obesity, insulin resistance and type 2 diabetes is the permanent elevation of free fatty acids in plasma followed by impaired utilization of lipids by muscle. Diabetes-induced inflammation and oxidative stress have also vital role for development of insulin resistance in diabetic patients. The present review is intended to describe the correlation between lipids, obesity and insulin resistance based on current literature, in order to elucidate involved molecular mechanisms in depth. [ABSTRACT FROM AUTHOR]