In this study, we investigated the hypothesis that impairments in forearm skeletal muscle free fatty acid (FFA) metabolism are present in patients with type 2 diabetes both in the overnight fasted state and during β-adrenergic stimulation. Eight obese subjects with type 2 diabetes and eight nonobese controls (Con) were studied using the forearm balance technique and indirect calorimetry during infusion of the stable isotope tracer [U-¹³C]palmitate after an overnight fast and during infusion of the nonselective β-agonist isoprenaline (Iso, 20 ng · kg lean body mass⁻¹ · min⁻¹). Additionally, activities of mitochondrial enzymes and of cytoplasmatic fatty acid-binding protein (FABP) were determined in biopsies from the vastus lateralis muscle. Both during fasting and Iso infusion, the tracer balance data showed that forearm muscle FFA uptake (Con vs. type 2: fast 449 ± 69 vs. 258 ± 42 and Iso 715 ± 129 vs. 398 ± 70 nmol · 100 ml tissue⁻¹ · min⁻¹, P < 0.05) and FFA release were lower in type 2 diabetes compared with Con. Also, the oxidation of plasma FFA by skeletal muscle was blunted during Iso infusion in type 2 diabetes (Con vs. type 2: Iso 446 ± 274 vs. 16 ± 70 nmol · 100 ml tissue⁻¹ · min⁻¹, P < 0.05). The net forearm glycerol release was increased in type 2 diabetic subjects (P < 0.05), which points to an increased forearm lipolysis. Additionally, skeletal muscle cytoplasmatic FABP content and the activity of muscle oxidative enzymes were lowered in type 2 diabetes. We conclude that the uptake and oxidation of plasma FFA are impaired in the forearm muscles of type 2 diabetic subjects in the overnight fasted state with and without Iso stimulation.