Non-alcoholic fatty liver (NAFL) is an independent risk factor for the development of type 2 diabetes (T2DM). We examined metabolic perturbations in patients with NAFL, patients with T2DM, and control (CON) subjects with normal intrahepatic lipid (IHL) content. A two-step (10 mU/m2 /min; 40 mU/m2/min) hyperinsulinemic–euglycemic clamp was performed in 11 NAFL, 13 T2DM, and 11 CON subjects, all matched for BMI, and aerobic fitness. IHL content was measured using proton magnetic resonance spectroscopy. Because of high IHL content variability in T2DM patients, this group was separated into a high IHL content group (IHL ≥ 5.0%, T2DM+NAFL) and a normal IHL content group (IHL < 5.0%, T2DM-non-NAFL) for further analysis. IHL content was increased in NAFL and T2DM+NAFL subjects (P<0.050 versus CON and T2DM-non-NAFL subjects). Adipose tissue insulin sensitivity index (Adipo-IRi) was higher in NAFL (P<0.050 versus CON and T2DM-non-NAFL subjects) and in T2DM+NAFL subjects (P=0.055 versus CON subjects, P<0.050 versus T2DM-non-NAFL subjects). Suppression of plasma-free fatty acids (P=0.046) was lower in NAFL compared with CON subjects, with intermediate values for T2DM-non-NAFL, and T2DM+NAFL subjects. Suppression of endogenous glucose production (EGP) and insulin-stimulated glucose disposal (ΔRd) was comparable between NAFL, T2DM-non-NAFL, and T2DM+NAFL subjects (all P>0.05), and was lower in comparison with CON subjects (all P<0.01). Metabolic flexibility was lower in T2DM-non-NAFL subjects (P=0.047) and NAFL subjects (P=0.059) compared with CON subjects. Adipo-IRi (r=0.652, P<0.001), hepatic insulin resistance index (HIRi) (r=0.576, P=0.001), and ΔRd (r=−0.653, P<0.001) correlated with IHL content. Individuals with NAFL suffer from metabolic perturbations to a similar degree as T2DM patients. NAFL is an important feature leading to severe insulin resistance and should be viewed as a serious health threat for the development of T2DM. ClinicalTrials.gov: NCT01317576