Insulin resistance plays a primary role in the development of type 2 diabetes and may be related to alterations in fat metabolism. Recent studies have suggested that local accumulation of fat metabolites inside skeletal muscle may activate a serine kinase cascade involving protein kinase C–θ (PKC-θ), leading to defects in insulin signaling and glucose transport in skeletal muscle. To test this hypothesis, we examined whether mice with inactivation of PKC-θ are protected from fat-induced insulin resistance in skeletal muscle. Skeletal muscle and hepatic insulin action as assessed during hyperinsulinemic-euglycemic clamps did not differ between WT and PKC-θ KO mice following saline infusion. A 5-hour lipid infusion decreased insulin-stimulated skeletal muscle glucose uptake in the WT mice that was associated with 40–50% decreases in insulin-stimulated tyrosine phosphorylation of insulin receptor substrate–1 (IRS-1) and IRS-1–associated PI3K activity. In contrast, PKC-θ inactivation prevented fat-induced defects in insulin signaling and glucose transport in skeletal muscle. In conclusion, our findings demonstrate that PKC-θ is a crucial component mediating fat-induced insulin resistance in skeletal muscle and suggest that PKC-θ is a potential therapeutic target for the treatment of type 2 diabetes.