Disturbances in pathways of lipolysis and fatty acid handling are of importance in the aetiology of obesity and type 2 diabetes mellitus. There is evidence that a lowered catecholamine-mediated lipolytic response may play a role in the development and maintenance of increased adipose tissue stores. Increased adipose tissue stores, a disturbed insulin-mediated regulation of lipolysis and subnormal skeletal muscle non-esterified fatty acid (NEFA) uptake under conditions of high lipolytic rate may increase circulating NEFA concentrations, which may promote insulin resistance and cardiovascular complications. In addition, a disturbance of NEFA uptake by adipose tissue postprandially is also a critical determinant of plasma NEFA concentration. Furthermore, evidence is increasing that insulin-resistant muscle is characterised by a lowered ability to oxidise fatty acids. A dysbalance between fatty acid uptake and fatty acid oxidation may in turn be a factor promoting accumulation of lipid intermediates and triacylglycerols within skeletal muscle, which is strongly associated with skeletal muscle insulin resistance. The present review describes the reported disturbances in pathways of lipolysis and skeletal muscle fatty acid handling, and discusses underlying mechanisms and metabolic consequences of these disturbances.