Background: Nonalcoholic fatty liver disease (NAFLD) and insulin resistance are common in overweight adolescents. Objective: The purpose of this study was to determine the relation between NAFLD and insulin sensitivity in liver and skeletal muscle by studying overweight adolescents with a normal or high intrahepatic triglyceride (IHTG) content, who were matched for age, sex, body mass index (BMI; in kg/m2), and Tanner stage. Design: Stable-isotope-labeled tracer infusion and the hyperinsulinemic-euglycemic clamp procedure were used to assess skeletal muscle and hepatic insulin sensitivity, and magnetic resonance spectroscopy was used to assess the IHTG content in 10 overweight (BMI = 35.9 ± 1.3) adolescents with NAFLD (IHTG = 28.4 ± 3.4%) and 10 overweight (BMI = 36.6 ± 1.5) adolescents with a normal IHTG content (3.3 ± 0.5%). Results: The baseline plasma glucose concentration and the rate of appearance of glucose in plasma were the same in subjects with a normal (87.1 ± 1.2 mg/dL, 16.2 ± 1.1 μmol · kg fat-free mass-1 · min-1) or high (89.2 ± 2.5 mg/dL, 16.3 ± 1.2 μmol · kg fat-free mass-1 · min-1) IHTG content. However, compared with subjects who had a normal IHTG content, subjects with NAFLD had a lower hepatic insulin sensitivity index, based on baseline glucose kinetics and insulin concentrations (4.0 ± 0.5 compared with 2.4 ± 0.4; P < 0.05) and an impaired increase in glucose uptake during insulin infusion (169 ± 28.1% compared with 67 ± 9.6% above baseline; P < 0.01). In addition, the plasma triglyceride concentration was greater and the plasma HDL-cholesterol concentration was lower in subjects with NAFLD than in those with a normal IHTG content. Conclusion: An elevated IHTG content in overweight adolescents is associated with dyslipidemia and with insulin-resistant glucose metabolism in both liver and skeletal muscle.