Though the overall prevalence of type 2 diabetes is increasing in US and in all other westernized countries, significant differences are noted among different ethnic groups. The reasons for ethnic differences in the risk of type 2 diabetes are not entirely understood. For example, Asian Indians (people from India, Pakistan, and Bangladesh) have remarkably high prevalence of type 2 diabetes compared to Caucasians. However, the incidence of obesity, an important risk factor in the development of type 2 diabetes, is significantly lower in Asian Indians compared to Caucasians. Though westernization of lifestyle with dietary changes and lack of exercise may play a role in increased prevalence of type 2 diabetes in migrant Asian Indians, various epidemiological studies have shown that these factors alone are not sufficient to explain this trend. One important factor contributing to increased type 2 diabetes in Asian Indians is excessive insulin resistance compared to Caucasians. This difference in the degree of insulin resistance may be explained by either an environmental or a genetic factor or by combination of both. The understanding of the etiology and mechanisms causing increased insulin resistance in Asian Indians will provide clues to more effective prevention and treatment of diabetes in this ethnic group. Furthermore, the information may help in understanding the pathophysiology of type 2 diabetes in other ethnic groups and improve methods of treatment and prevention in all ethnic groups. Since the ethnic mix of the US population is changing rapidly and it is estimated that by the year 2020, over 50% of US population will include non-Caucasian ethnicity, the identification of the mechanism involved in the excessive development of type 2 diabetes in non-Caucasians becomes important. In this review, possible etiology of excessive insulin resistance and role of free fatty acids (FFA) in insulin resistance in Asian Indians is discussed. Finally, the role of targeting insulin resistance in prevention and treatment of diabetes is discussed.