Chronic inflammation is now recognized as a key step in the pathogenesis of obesity-induced insulin resistance and type 2 diabetes mellitus. This low-grade inflammation is mediated by the inflammatory (classical) activation of recruited and resident macrophages that populate metabolic tissues, including adipose tissue and liver. These findings have led to the concept that infiltration by and activation of macrophages in adipose tissue are causally linked to obesity-induced insulin resistance. Studies have shown, however, that alternatively activated macrophages taking residence in adipose tissue and liver perform beneficial functions in obesity-induced metabolic disease. Alternatively activated macrophages reduce insulin resistance in obese mice by attenuating tissue inflammation and increasing oxidative metabolism in liver and skeletal muscle. The discovery that distinct subsets of macrophages are involved in the promotion or attenuation of insulin resistance suggests that pathways controlling macrophage activation can potentially be targeted to treat these comorbidities of obesity. Thus, this Review focuses on the stimuli and mechanisms that control classical and alternative activation of tissue macrophages, and how these macrophage activation programs modulate insulin action in peripheral tissues. The functional importance of macrophage activation is further discussed in the context of host defense to highlight the crosstalk between innate immunity and metabolism.