Numerous studies conducted on obese humans and various rodent models of obesity have identified a correlation between hepatic lipid content and the development of insulin resistance in liver and other tissues. Despite a large body of the literature on this topic, the cause and effect relationship between hepatic steatosis and insulin resistance remains controversial. If, as many believe, lipid aggregation in liver drives insulin resistance and other metabolic abnormalities, there are significant unanswered questions as to which lipid mediators are causative in this cascade. Several published papers have now correlated levels of diacylglycerol (DAG), the penultimate intermediate in triglyceride synthesis, with development of insulin resistance and have postulated that this occurs via activation of protein kinase C signaling. Although many studies have confirmed this relationship, many others have reported a disconnect between DAG content and insulin resistance. It has been postulated that differences in methods for DAG measurement, DAG compartmentalization within the cell, or fatty acid composition of the DAG may explain these discrepancies. The purpose of this review is to compare and contrast some of the relevant findings in this area and to discuss a number of unanswered questions regarding the relationship between DAG and insulin resistance.