Multiple studies suggest that lipid oversupply to skeletal muscle contributes to the development of insulin resistance, perhaps by promoting the accumulation of lipid metabolites capable of inhibiting signal transduction. Herein we demonstrate that exposing muscle cells to particular saturated free fatty acids (FFAs), but not mono-unsaturated FFAs, inhibits insulin stimulation of Akt/protein kinase B, a serine/threonine kinase that is a central mediator of insulin-stimulated anabolic metabolism. These saturated FFAs concomitantly induced the accumulation of ceramide and diacylglycerol, two products of fatty acyl-CoA that have been shown to accumulate in insulin-resistant tissues and to inhibit early steps in insulin signaling. Preventing de novo ceramide synthesis negated the antagonistic effect of saturated FFAs toward Akt/protein kinase B. Moreover, inducing ceramide buildup recapitulated and augmented the inhibitory effect of saturated FFAs. By contrast, diacylglycerol proved dispensable for these FFA effects. Collectively these results identify ceramide as a necessary and sufficient intermediate linking saturated fats to the inhibition of insulin signaling.