Testosterone is a hormone that plays a key role in carbohydrate, fat and protein metabolism. It has been known for some time that testosterone has a major influence on body fat composition and muscle mass in the male. Testosterone deficiency is associated with an increased fat mass (in particular central adiposity), reduced insulin sensitivity, impaired glucose tolerance, elevated triglycerides and cholesterol and low HDL-cholesterol. All these factors are found in the metabolic syndrome (MetS) and type 2 diabetes, contributing to cardiovascular risk. Clinical trials demonstrate that testosterone replacement therapy improves the insulin resistance found in these conditions as well as glycaemic control and also reduces body fat mass, in particular truncal adiposity, cholesterol and triglycerides. The mechanisms by which testosterone acts on pathways to control metabolism are not fully clear. There is, however, an increasing body of evidence from animal, cell and clinical studies that testosterone at the molecular level controls the expression of important regulatory proteins involved in glycolysis, glycogen synthesis and lipid and cholesterol metabolism. The effects of testosterone differ in the major tissues involved in insulin action, which include liver, muscle and fat, suggesting a complex regulatory influence on metabolism. The cumulative effects of testosterone on these biochemical pathways would account for the overall benefit on insulin sensitivity observed in clinical trials. This review discusses the current knowledge of the metabolic actions of testosterone and how testosterone deficiency contributes to the clinical disease states of obesity, MetS and type 2 diabetes and the role of testosterone replacement.