Obesity is associated with a decrement in the ability of skeletal muscle to oxidize lipid. The purpose of this investigation was to determine whether clinical interventions (weight loss, exercise training) could reverse the impairment in fatty acid oxidation (FAO) evident in extremely obese individuals. FAO was assessed by incubating skeletal muscle homogenates with [1-¹⁴C]palmitate and measuring ¹⁴CO₂ production. Weight loss was studied using both cross-sectional and longitudinal designs. Muscle FAO in extremely obese women who had lost weight (decrease in body mass of ∼50 kg) was compared with extremely obese and lean individuals (BMI of 22.8 ± 1.2, 50.7 ± 3.9, and 36.5 ± 3.5 kg/m² for lean, obese, and obese after weight loss, respectively). There was no difference in muscle FAO between the extremely obese and weight loss groups, and FAO was depressed (−45%; P ≤ 0.05) compared with the lean subjects. Muscle FAO also did not change in extremely obese women (n = 8) before and 1 yr after a 55-kg weight loss. In contrast, 10 consecutive days of exercise training increased (P ≤ 0.05) FAO in the skeletal muscle of lean (+1.7-fold), obese (+1.8-fold), and previously extremely obese subjects after weight loss (+2.6-fold). mRNA content for PDK4, CPT I, and PGC-1α corresponded with FAO in that there were no changes with weight loss and an increase with physical activity. These data indicate that a defect in the ability to oxidize lipid in skeletal muscle is evident with obesity, which is corrected with exercise training but persists after weight loss.