Spillover of lipoprotein lipase-generated fatty acids from chylomicrons into the plasma free fatty acid (FFA) pool is an important source of FFA and reflects inefficiency in dietary fat storage. We measured spillover in 13 people with type 2 diabetes using infusions of a [(3)H]triolein-labeled lipid emulsion and [U-(13)C]oleate during continuous feeding, before and after weight loss. Body fat was measured with dual energy X-ray absorptiometry and computed tomography. Participants lost ∼14% of body weight. There was an ∼38% decrease in meal-suppressed FFA concentration (P < 0.0001) and an ∼23% decrease in oleate flux (P = 0.007). Fractional spillover did not change (P = NS). At baseline, there was a strong negative correlation between spillover and leg fat (r = -0.79, P = 0.001) and a positive correlation with the trunk-to-leg fat ratio (R = 0.56, P = 0.047). These correlations disappeared after weight loss. Baseline leg fat (R = -0.61, P = 0.027) but not trunk fat (R = -0.27, P = 0.38) negatively predicted decreases in spillover with weight loss. These results indicate that spillover, a measure of inefficiency in dietary fat storage, is inversely associated with lower body fat in type 2 diabetes.