Insulin resistance is characterized by hyperglycaemia, dyslipidaemia and oxidative stress prior to the development of type 2 diabetes mellitus. To date, a number of mechanisms have been proposed to link these syndromes together, but it remains unclear what the unifying condition that triggered these events in the progression of this metabolic disease. There have been a steady accumulation of data in numerous experimental studies showing the strong correlations between mitochondrial dysfunction, oxidative stress and insulin resistance. In addition, a growing number of studies suggest that the raised plasma free fatty acid level induced insulin resistance with the significant alteration of oxidative metabolism in various target tissues such as skeletal muscle, liver and adipose tissue. In this review, we herein propose the idea of long chain fatty acid-induced mitochondrial dysfunctions as one of the key events in the pathophysiological development of insulin resistance and type 2 diabetes. The accumulation of reactive oxygen species, lipotoxicity, inflammation-induced endoplasmic reticulum stress and alterations of mitochondrial gene subset expressions are the most detrimental that lead to the developments of aberrant intracellular insulin signalling activity in a number of peripheral tissues, thereby leading to insulin resistance and type 2 diabetes.