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: Nonalcoholic fatty liver disease (NAFLD), hepatic insulin resistance, and type 2 diabetes are all strongly associated and are all reaching epidemic proportions. Whether there is a causal link between NAFLD and hepatic insulin resistance is controversial. This review will discuss recent studies in both humans and animal models of NAFLD that have implicated increases in hepatic diacylglycerol (DAG) content leading to activation of novel protein kinase C[epsilon] (PKC[epsilon]) resulting in decreased insulin signaling in the pathogenesis of NAFLD-associated hepatic insulin resistance and type 2 diabetes. The DAG-PKC[epsilon] hypothesis can explain the occurrence of hepatic insulin resistance observed in most cases of NAFLD associated with obesity, lipodystrophy, and type 2 diabetes. (Hepatology 2014;59:713-723)

(C) 2014 John Wiley & Sons, Inc.