Cellular toxicity mediated by lipids (lipotoxicity) has been implicated in the pathophysiology of metabolic syndrome and diabetes mellitus. Genetic analyses now implicate lipotoxicity in susceptibility to type 2 diabetes mellitus-associated nephropathy (T2DN), a pathway that had previously been unexplored. A genome-wide association study in Japanese patients identified a single nucleotide polymorphism in the acetyl-CoA carboxylase β (ACACB) gene associated with T2DN. Replication analyses suggest that this same polymorphism may be a diabetic nephropathy risk allele in other ethnic groups. The ACACB gene (also called ACC2 or acetyl-CoA carboxylase 2) plays a critical role in intracellular fatty acid (FA) oxidation. This manuscript reviews the physiology of FA metabolism and adverse cellular effects that can result from dysregulation of this process. It is hypothesized that glomerular and tubular dysfunction can be induced by increases in intracellular FA concentrations, a process that may be enabled by genetic risk variants. This novel glucolipotoxicity hypothesis in T2DN warrants further investigation.