Metabolic disease, including obesity and type 2 diabetes, constitutes a major emerging health crisis in Western nations. Although the symptoms and clinical pathology and physiology of these conditions are well understood, the molecular mechanisms underlying the disease process have largely remained obscure. Sphingolipids, a lipid class with both signaling and structural properties, have recently emerged as key players in most major tissues affected by diabetes and are required components in the molecular etiology of this disease. Indeed, sphingolipids have been shown to mediate loss of insulin sensitivity, to promote the characteristic diabetic proinflammatory state, and to induce cell death and dysfunction in important organs such as the pancreas and heart. Furthermore, plasma sphingolipid levels are emerging as potential biomarkers for the decompensation of insulin resistance to frank type 2 diabetes. Despite these discoveries, the roles of specific sphingolipid species and sphingolipid metabolic pathways remain obscure, and newly developed experimental approaches must be employed to elucidate the detailed molecular mechanisms necessary for rational drug development and other clinical applications.