Obesity, the major cause of the current global epidemic of type 2 diabetes (T2D), induces insulin resistance in peripheral insulin target tissues. Several mechanisms have been identified related to cross‐talk between adipose tissue, skeletal muscle and liver. These mechanisms involve both increased free fatty acid release and altered secretion of adipokines from adipose tissue. A major determinant of metabolic health is the ability of subcutaneous adipose tissue (SAT) to store excess fat rather than allowing it to accumulate in ectopic depots including liver (i.e. in nonalcoholic fatty liver disease), muscle and heart, or in epicardial/pericardial and visceral fat depots which promote the metabolic complications of obesity. The ability to recruit and differentiate precursor cells into adipose cells (adipogenesis) in SAT is under genetic regulation and is reduced in high‐risk individuals who have first‐degree relatives with T2D. Early recruitment of new adipose cells is dependent on the cross‐talk between canonical WNT and BMP4 signalling; WNT enhances their undifferentiated and proliferative state whereas BMP4 induces their commitment to the adipogenic lineage. Dysregulation of these signalling pathways is associated with impaired adipogenesis and impaired ability to respond to the need to store excess lipids in SAT. This leads to hypertrophic, dysfunctional and insulin‐resistant adipose cells with a reduced content of GLUT4, the major insulin‐regulated glucose transporter, which in turn reduces adipose tissue glucose uptake and de novo lipogenesis. We recently identified that reduced GLUT4 and lipogenesis in adipocytes impairs the synthesis of a novel family of lipids secreted by adipose tissue (and potentially other tissues), branched fatty acid esters of hydroxy fatty acids (FAHFAs). FAHFAs have beneficial metabolic effects, including enhancing insulin‐stimulated glucose transport and glucose‐stimulated GLP1 and insulin secretion, as well as powerful anti‐inflammatory effects. FAHFA levels are reduced in subcutaneous adipose tissue in insulin‐resistant individuals, and this novel family of lipids may become of future therapeutic use.