Fatty acid overload has been proposed as a cause of decreased responsiveness in the major insulin target tissues of the body such as muscle and liver tissue. We therefore investigated fatty acid oxidation in soleus muscle and liver isolated from Zucker diabetic fatty (ZDF) rats treated with thiazolidinediones, a new class of antidiabetic agents. 14CO2 production from [14C]palmitic (C16:0) acid was lower in the soleus muscle and liver of ZDF rats versus lean rats (P < .05). When administered orally to ZDF rats for 2 weeks, the thiazolidinediones troglitazone (300 mg/kg) and KRP-297 (10 mg/kg) increased palmitic acid oxidation in the soleus muscle of ZDF rats (P < .05). KRP-297, but not troglitazone, increased palmitic acid oxidation in the liver of ZDF rats (P < .05), and both troglitazone and KRP-297 inhibited triglyceride accumulation in the skeletal muscle of ZDF rats. Hepatic triglyceride accumulation in ZDF rats was inhibited by KRP-297, but not by troglitazone. A reduction of fatty acid oxidation in the liver of ZDF rats and an increase in response to KRP-297 were observed only when C16:0 and C18:0 fatty acids, not C8:0, were used as substrates. Thus, there were defects in fatty acid catabolic activity and triglyceride accumulation in the soleus muscle and liver of ZDF rats. These results indicate that KRP-297 has advantages over troglitazone in the amelioration of these lipid metabolic abnormalities in insulin resistance associated with obesity.