Due to its epidemiological dimensions, there are tremendous efforts to understand the ultimate pathways that lead from modern Western lifestyles to the development of insulin resistance and, finally, overt type 2 diabetes (T2DM), which is often accompanied by nonalcoholic fatty liver disease (NAFLD). The insulin-resistant liver is intimately involved in T2DM, since it importantly contributes to high circulating blood glucose levels due to the unsuppressed release of glucose, even in the fasted state. There is a large body of literature on the “involvement” of mitochondrial dysfunction in the liver in the development of T2DM. However, it is unclear if mitochondrial dysfunction causes hepatic insulin resistance, thereby truly contributing to the development of T2DM and NAFLD, or if it is just a consequence. Also, the term mitochondrial dysfunction has been used in a very uncritical way. Finally, there seems to be a continuum of mitochondrial changes during the development of NAFLD, from the initial benign steatosis to nonalcoholic steatohepatitis (NASH). In this chapter, we summarize the current knowledge on mitochondrial functions and their failure and critically review the existing literature on these processes in the liver during the development of T2DM and NASH.