We have studied the relationships between hepatic lipase activity, smoking, dyslipidaemia insulin resistance, and early atherosclerosis in 67 Type 2 diabetic subjects, 47 non-smokers and 20 smokers. Insulin resistance was measured using an insulin modified frequently sampled intravenous glucose tolerance test. Early atherosclerosis was assessed using high-resolution ultrasound to measure carotid intima media thickness (IMT) and an arterial ultrasonic score (AUS). Smokers had higher serum cholesterol and triglyceride, lower HDL and HDL2 cholesterol as well as increased hepatic lipase activity. They were also more insulin resistant than non-smokers. Smokers also had higher patient AUS scores. On multiple regression analysis, hepatic lipase activity emerged as the most significant variable affecting patient AUS. We suggest that smoking accentuates the dyslipidaemia of Type 2 diabetic subjects and this is associated with increased hepatic lipase activity. This may be one mechanism whereby smoking further increases the risk of cardiovascular disease in Type 2 diabetes.