Diabetes mellitus is occasionally observed in patients with skeletal muscle respiratory chain deficiency, suggesting that skeletal muscle mitochondrial dysfunction might play a pathogenic role in type 2 diabetes (T2D). In support of this hypothesis, decreased muscle mitochondrial activity has been reported in T2D patients and in mouse models of diabetes. However, recent work by several groups suggests that decreased muscle mitochondrial function may be a consequence rather than a cause of diabetes, since decreased mitochondrial function in mice affords protection from diabetes and obesity. We review the data on this controversial but important issue of potential links between mitochondrial dysfunction and diabetes.