Aims/hypothesis: Overproduction of VLDL1 seems to be the central pathophysiological feature of the dyslipidaemia associated with type 2 diabetes. We explored the relationship between liver fat and suppression of VLDL1 production by insulin in participants with a broad range of liver fat content. Methods: A multicompartmental model was used to determine the kinetic parameters of apolipoprotein B and TG in VLDL1 and VLDL2 after a bolus of [2H3]leucine and [2H5]glycerol during a hyperinsulinaemic–euglycaemic clamp in 20 male participants: eight with type 2 diabetes and 12 control volunteers. The participants were divided into two groups with low or high liver fat. All participants with diabetes were in the high liver-fat group. Results: The results showed a rapid drop in VLDL1-apolipoprotein B and -triacylglycerol secretion in participants with low liver fat during the insulin infusion. In contrast, participants with high liver fat showed no significant change in VLDL1 secretion. The VLDL1 suppression following insulin infusion correlated with the suppression of NEFA, and the ability of insulin to suppress the plasma NEFA was impaired in participants with high liver fat. A novel finding was an inverse response between VLDL1 and VLDL2 secretion in participants with low liver fat: VLDL1 secretion decreased acutely after insulin infusion whereas VLDL2 secretion increased. Conclusions/interpretation: Insulin downregulates VLDL1 secretion and increases VLDL2 secretion in participants with low liver fat but fails to suppress VLDL1 secretion in participants with high liver fat, resulting in overproduction of VLDL1. Thus, liver fat is associated with lack of VLDL1 suppression in response to insulin.