Decreased uncoupling protein (UCP)3 is associated with insulin resistance in muscle of pre-diabetic and diabetic individuals, but the function of UCP3 remains unclear. Our goal was to elucidate mechanisms underlying the negative correlation between UCP3 and insulin resistance in muscle. We determined effects of physiologic UCP3 overexpression on glucose and fatty acid oxidation and on mitochondrial uncoupling and reactive oxygen species (ROS) production in L6 muscle cells. An adenoviral construct caused a 2.2- to 2.5-fold increase in UCP3 protein. Palmitate oxidation was increased in muscle cells incubated under normoglycemic or hyperglycemic conditions, whereas adenoviral green fluorescent protein infection or chronic low doses of the uncoupler dinitrophenol had no effect. Increased UCP3 did not affect glucose oxidation, whereas dinitrophenol and insulin treatments caused increases. Basal oxygen consumption, assessed in situ using self-referencing microelectrodes, was not significantly affected, whereas dinitrophenol caused increases. Mitochondrial membrane potential was decreased by dinitrophenol but was not affected by increased UCP3 expression. Finally, mitochondrial ROS production decreased significantly with increased UCP3 expression. Results are consistent with UCP3 functioning to facilitate fatty acid oxidation and minimize ROS production. As impaired fatty acid metabolism and ROS handling are important precursors in muscular insulin resistance, UCP3 is an important therapeutic target in type 2 diabetes.