Tumor necrosis factor alpha (TNF-alpha) has well-described effects on lipid metabolism in the context of acute inflammation, as in sepsis. Recently, increased TNF-alpha production has been observed in adipose tissue derived from obese rodents or human subjects and TNF-alpha has been implicated as a causative factor in obesity-associated insulin resistance and the pathogenesis of type 2 diabetes. Thus, current evidence suggests that administration of exogenous TNF-alpha to animals can induce insulin resistance, whereas neutralization of TNF-alpha can improve insulin sensitivity. Importantly, results from knockout mice deficient in TNF-alpha or its receptors have suggested that TNF-alpha has a role in regulating in vivo insulin sensitivity. However, the absence of TNF-alpha action might only partially protect against obesity-induced insulin resistance in mice. Multiple mechanisms have been suggested to account for these metabolic effects of TNF-alpha. These include the downregulation of genes that are required for normal insulin action, direct effects on insulin signaling, induction of elevated free fatty acids via stimulation of lipolysis, and negative regulation of PPAR gamma, an important insulin-sensitizing nuclear receptor. Although current evidence suggests that neutralizing TNF-alpha in type 2 diabetic subjects is not sufficient to cause metabolic improvement, it is still probable that TNF-alpha is a contributing factor in common metabolic disturbances such as insulin resistance and dyslipidemia.