OBJECTIVE— Type 2 diabetes has become a global epidemic, and Asian Indians have a higher susceptibility to diabetes than Europeans. We investigated whether Indians had any metabolic differences compared with Northern European Americans that may render them more susceptible to diabetes. RESEARCH DESIGN AND METHODS— We studied 13 diabetic Indians, 13 nondiabetic Indians, and 13 nondiabetic Northern European Americans who were matched for age, BMI, and sex. The primary comparisons were insulin sensitivity by hyperinsulinemic-euglycemic clamp and skeletal muscle mitochondrial capacity for oxidative phosphorylation (OXPHOS) by measuring mitochondrial DNA copy number (mtDNA), OXPHOS gene transcripts, citrate synthase activity, and maximal mitochondrial ATP production rate (MAPR). Other factors that may cause insulin resistance were also measured. RESULTS— The glucose infusion rates required to maintain identical glucose levels during the similar insulin infusion rates were substantially lower in diabetic Indians than in the nondiabetic participants (P < 0.001), and they were lower in nondiabetic Indians than in nondiabetic Northern European Americans (P < 0.002). mtDNA (P < 0.02), OXPHOS gene transcripts (P < 0.01), citrate synthase, and MAPR (P < 0.03) were higher in Indians irrespective of their diabetic status. Intramuscular triglyceride, C-reactive protein, interleukin-6, and tumor necrosis factor-α concentrations were higher, whereas adiponectin concentrations were lower in diabetic Indians. CONCLUSIONS— Despite being more insulin resistant, diabetic Indians had similar muscle OXPHOS capacity as nondiabetic Indians, demonstrating that diabetes per se does not cause mitochondrial dysfunction. Indians irrespective of their diabetic status had higher OXPHOS capacity than Northern European Americans, although Indians were substantially more insulin resistant, indicating a dissociation between mitochondrial dysfunction and insulin resistance.