OBJECTIVE: Insulin resistance is associated with elevated content of skeletal muscle lipids, including triacylglycerols (TAGs) and diacylglycerols (DAGs). DAGs are by-products of lipolysis consecutive to TAG hydrolysis by adipose triglyceride lipase (ATGL) and are subsequently hydrolyzed by hormone-sensitive lipase (HSL). We hypothesized that an imbalance of ATGL relative to HSL (expression or activity) may contribute to DAG accumulation and insulin resistance. RESEARCH DESIGN AND METHODS: We first measured lipase expression in vastus lateralis biopsies of young lean (n = 9), young obese (n = 9), and obese-matched type 2 diabetic (n = 8) subjects. We next investigated in vitro in human primary myotubes the impact of altered lipase expression/activity on lipid content and insulin signaling. RESULTS: Muscle ATGL protein was negatively associated with whole-body insulin sensitivity in our population (r = -0.55, P = 0.005), whereas muscle HSL protein was reduced in obese subjects. We next showed that adenovirus-mediated ATGL overexpression in human primary myotubes induced DAG and ceramide accumulation. ATGL overexpression reduced insulin-stimulated glycogen synthesis (-30%, P < 0.05) and disrupted insulin signaling at Ser1101 of the insulin receptor substrate-1 and downstream Akt activation at Ser473. These defects were fully rescued by nonselective protein kinase C inhibition or concomitant HSL overexpression to restore a proper lipolytic balance. We show that selective HSL inhibition induces DAG accumulation and insulin resistance. CONCLUSIONS: Altogether, the data indicate that altered ATGL and HSL expression in skeletal muscle could promote DAG accumulation and disrupt insulin signaling and action. Targeting skeletal muscle lipases may constitute an interesting strategy to improve insulin sensitivity in obesity and type 2 diabetes.