To determine whether the hepatic insulin resistance of obesity and type 2 diabetes is due to impaired insulin-induced suppression of glycogenolysis as well as gluconeogenesis, 10 lean nondiabetic, 10 obese nondiabetic, and 11 obese type 2 diabetic subjects were studied after an overnight fast and during a hyperinsulinemic-euglycemic clamp. Gluconeogenesis and glycogenolysis were measured using the deuterated water method. Before the clamp, when glucose and insulin concentrations differed among the three groups, gluconeogenesis was higher in the diabetic than in the obese nondiabetic subjects (P < 0.05) and glycogenolysis was higher in the diabetic than in the lean nondiabetic subjects (P < 0.05). During the clamp, when glucose and insulin concentrations were matched and glucagon concentrations were suppressed, both glycogenolysis and gluconeogenesis were higher (P < 0.01) in the diabetic versus the obese and lean nondiabetic subjects. Furthermore, glycogenolysis and gluconeogenesis were higher (P < 0.01) in the obese than in the lean nondiabetic subjects. Plasma free fatty acid concentrations correlated (P < 0.001) with glucose production and gluconeogenesis both before and during the clamp and with glycogenolysis during the clamp (P < 0.01). We concluded that defects in the regulation of glycogenolysis as well as gluconeogenesis cause hepatic insulin resistance in obese nondiabetic and type 2 diabetic humans.