Aims/hypothesis: Insulin resistance may be associated with ectopic fat accumulation potentially determined by reduced lipid oxidation. In patients with type 1 diabetes peripheral insulin resistance is associated with higher intramyocellular lipid content. We assessed whether these patients are also characterised by intrahepatic fat accumulation and abnormal fat oxidation. Methods: Nineteen patients with type 1 diabetes (6 women, 13 men, age 35±7 years, BMI 23±3 kg/m 2 , HbA 1 c 8.7±1.4%) and 19 healthy matched individuals were studied by (1) euglycaemic−hyperinsulinaemic clamp combined with [6, H 2 ]glucose infusion to assess whole-body glucose metabolism; (2) indirect calorimetry to assess glucose and lipid oxidation; and (3) localised 1 H-magnetic resonance spectroscopy of the liver to assess intrahepatic fat content. Results: Patients with type 1 diabetes showed a reduced insulin-stimulated metabolic clearance rate of glucose (4.3±1.3 ml kg -1 min -1 ) in comparison with normal subjects (6.0±1.6 ml kg -1 min -1 ; p<0.001). Endogenous glucose production was higher in diabetic patients (p=0.001) and its suppression was impaired during insulin administration (66±30 vs 92±8%; p=0.047) in comparison with normal subjects. Plasma glucagon concentrations were not different between groups. The estimated hepatic insulin concentration was lower in diabetic patients than in normal subjects (p<0.05), as was the intrahepatic fat content (1.5±0.7% and 2.2±1.0% respectively; p<0.03), the latter in association with a reduced respiratory quotient (0.74±0.05 vs 0.84±0.06; p=0.01) and increased fasting lipid oxidation (1.5±0.5 vs 0.8±0.4 mg kg -1 min -1 ; p<0.01). Conclusions/interpretation: In patients with type 1 diabetes, insulin resistance was not associated with increased intrahepatic fat accumulation. In fact, diabetic patients had reduced intrahepatic fat content, which was associated with increased fasting lipid oxidation. The unbalanced hepatic glucagon and insulin concentrations affecting patients with type 1 diabetes may be involved in this abnormality of intrahepatic lipid metabolism.