Mechanisms of insulin resistance in subjects at risk for type 2 diabetes remain to be elucidated. Insulin acts slowly in vivo, but rapidly in vitro, suggesting that the pathway insulin traverses from B-cell to insulin sensitive tissue may be altered in diabetes. An important component of that pathway is transport of insulin across the capillary endothelium. Several groups have demonstrated that insulin resistance may result from reduced capillary permeability to insulin--it remains to be determined whether reduced permeability contributes to insulin resistance in any stage leading to type 2 diabetes. Interestingly, the transport of insulin across the endothelial barrier not only limits the rate of insulin to stimulate glucose uptake by skeletal muscle, but appears also to determine the rate at which insulin suppresses liver glucose output. Because the liver circulation is fenestrated, it is not possible that insulin transport into the liver is the rate determining step for suppression of liver glucose output. An alternative hypothesis was considered--that insulin is transported into an extrahepatic tissue. A "second signal" is generated by the extrahepatic tissue, the signal is released into the blood, and the signal in turn controls hepatic glucose output. Several lines of evidence suggest that the second signal is free fatty acids (FFA): 1) There is a strong correlation between FFA and liver glucose output under a variety of experimental conditions. 2) If FFA are maintained at basal concentrations during insulin administration, glucose output fails to decline. 3) If FFA are reduced independent of insulin administration, glucose output is reduced. These three points support the concept that insulin, by regulating adipocyte lipolysis, controls liver glucose production. Thus, the adipocyte is a critical mediator between insulin and liver glucose output. Evidence that FFA also suppress skeletal muscle glucose uptake and insulin secretion from the B-cell supports the overall central role of the adipocyte in the regulation of glycemia. Insulin resistance at the fat cell may be an important component of the overall regulation of glycemia because of the relationships between FFA and glucose production, glucose uptake, and insulin release. It is possible that insulin resistance at the adipocyte itself can be a major cause of the dysregulation of carbohydrate metabolism in the prediabetic state.