Aims/hypothesis: Intramyocellular lipid accumulation and insulin resistance are thought to be due to reduced lipid oxidation in a human model of high risk of developing type 2 diabetes. Methods: We studied 32 offspring of type 2 diabetic parents and 32 control individuals by means of DXA, indirect calorimetry, insulin clamp and 1 H MRS of the calf muscles, and differences between and within study groups were analysed before and after segregation by quartiles of fasting lipid oxidation. Results: In comparison with control subjects, the offspring showed impaired insulin sensitivity, which was associated with higher fasting intramyocellular lipid content (Spearman's rho −0.35; p=0.04), but fasting lipid oxidation did not differ between groups (1.21±0.46 vs. 1.25±0.37 mg·kg −1 lean body mass per min; p=0.70). Nevertheless, offspring in the lowest quartile of lipid oxidation had the most severe impairment of insulin sensitivity and a strong association was shown between lipid oxidation and insulin sensitivity within quartiles (Spearman's rho 0.47; p=0.01); this was not observed within the control group (Spearman's rho 0.13; p=0.47). Intramyocellular lipid content was not significantly different within quartiles of lipid oxidation in either of the groups. Conclusions/interpretation: Insulin sensitivity improved across increasing quartiles of fasting lipid oxidation in the offspring group, but remained constant in the control group, supporting the hypothesis that impaired fat oxidation is a primary pathogenic factor of insulin resistance in people with a genetic background for type 2 diabetes. Despite their association with impaired insulin sensitivity, soleus and tibialis anterior intramyocellular lipid content remained constant across increasing quartiles of fasting lipid oxidation within both groups.