It is known that free fatty acid (FFA) contributes to the development of insulin resistance and type2 diabetes. However, the underlying mechanism in FFA-induced insulin resistance is still unclear. In the present investigation we have demonstrated that palmitate significantly (p < 0.001) inhibited insulin - stimulated phosphorylation of PDK1, the key insulin signaling molecule. Consequently, PDK1 phosphorylation of plasma membrane bound PKC epsilon was also inhibited. Surprisingly, phosphorylation of cytosolic PKC epsilon was greatly stimulated by palmitate; this was then translocated to the nuclear region and associated with the inhibition of insulin receptor (IR) gene transcription. A PKC epsilon translocation inhibitor peptide, epsilon V1, suppressed this inhibitory effect of palmitate, suggesting requirement of phospho-PKC epsilon migration to implement palmitate effect. Experimental evidences indicate that phospho-PKC epsilon adversely affected HMGA1 Since HMGA1 regulates IR promoter activity, expression of IR gene was impaired causing reduction of IR on cell surface and that compromises with insulin sensitivity. (c) 2007 Elsevier Inc. All rights reserved.