Lipid is the main endogenous energy store within the human body. The majority of intracellular lipids are incorporated into discrete lipid droplets present in virtually all cell types. Lipid droplets are composed of a core of neutral lipids (primarily triacylglycerols; TG) and are surrounded by a phospholipid monolayer. The vast majority of TG in the human body is stored within adipose tissue, with smaller amounts present in skeletal muscle fibres. Although the intramuscular TG (IMTG) make up only 1-2% of the whole body lipid stores, IMTG recently attracted great scientific interest. Skeletal muscle lipid droplets provide fatty acids as substrate for oxidation during periods of increased energy expenditure; in addition, they play roles in lipid homeostasis and the generation of intracellular signals. Elevations in IMTG content have been linked to the development of metabolic diseases associated with obesity, such as insulin resistance and type 2 diabetes. Interest was further stimulated by the ‘athletes paradox’. Highly trained athletes have greater concentrations of IMTG than sedentary obese or obese type 2 diabetics, but have highly insulin sensitive muscles. Evidence has been generated that increased concentrations of intramuscular lipid metabolites [long-chain fatty acylCoA (LCFACoA), diacylglycerol (DAG), and ceramide] are responsible for the impairment in insulin action rather than the IMTG pool. LCFACoA and DAG activate PKC, which appears to induce impairments in insulin signaling through serine phosphorylation of the insulin receptor substrate-1. Alternatively, ceramide inhibits the insulin-signaling pathway downstream of PI3 kinase through the activation of protein phosphatase 2A, which dephosphorylates and inactivates Akt/PKB. The IMTG pool can provide a source of insulin resistance-inducing lipid metabolites and also provides a sink for lipid metabolites, and can thus protect against insulin resistance. Therefore, the enzymes and mechanisms regulating the turnover (synthesis and breakdown) of the IMTG pool as well as oxidation of intracellular fatty acids are important in the maintenance of insulin sensitivity in skeletal muscle. The aim of this review is to describe the effects of acute and chronic exercise upon IMTG metabolism and insulin sensitivity. IMTGs are a dynamic lipid storage depot that can be utilised during periods of elevated energy demand and can consume excess plasma and intramuscular fatty acids during periods of elevated lipid availability. There is an accumulating amount of evidence that the metabolic adaptations to endurance exercise that result in improved IMTG metabolism exert a protective effect upon muscle insulin sensitivity. Trained individuals have a higher capacity for lipid oxidation, with IMTG contributing ≥ 50%. Therefore, those involved in regular exercise regularly deplete IMTG stores. In the period after exercise, IMTG will remain low until dietary fat is ingested and IMTG synthesis rates will be elevated. Therefore, during periods of elevated lipid availability the FA will be efficiently channeled into IMTG in trained individuals. These regular IMTG depletion and replenishment cycles will maintain a mobile IMTG pool with small, metabolically flexible lipid droplets, which will aid the maintenance of low concentrations of LCFACoA, DAG, and ceramide and a high insulin sensitivity in skeletal muscle. On the other hand sedentary obese individuals rarely experience exercise-induced increases in FA oxidation and appear unable to utilize IMTG during exercise. Furthermore, fatty acid incorporation into IMTG will be reduced during elevated lipid availability due to the lack of regular IMTG depletion and replenishment cycles. This will result in the development of a static IMTG pool with enlarged lipid droplets. Resting fatty acid delivery and uptake into skeletal muscle is elevated in obesity due to the enlarged adipose tissue mass and, in addition due to the inefficient oxidation and/or storage of the incoming fatty acid, results in the accumulation of lipid metabolites in skeletal muscle. Furthermore, impairments in insulin signaling may also inhibit insulin stimulation of IMTG synthesis in addition to the well-described impairments in insulin signaling, GLUT4 translocation, and glucose uptake. Resultant hyperglycemia and hyperinsulinemia are likely to lead to a progressive decline of glycemic control. Therefore, the combination of a sedentary lifestyle and consumption of diets high in fat, is an important mechanistic cause of the progression of obesity and insulin resistance into type 2 diabetes and cardiovascular disease.