Studies of the past decade have increased our understanding of the role of adipose tissue dysfunction in obesity and obesity-related insulin resistance and type 2 diabetes. Although adipose tissue is the body's largest pool of free cholesterol, adipocytes have limited activity in cholesterol synthetic pathway. Thus, the majority of adipocyte cholesterol originates from circulating lipoproteins. To maintain cholesterol homeostasis, adipocytes have developed multiple pathways for cholesterol efflux. Several transcriptional factors, such as sterol regulatory element-binding proteins and liver X receptors may be responsible for the regulation of cholesterol homeostasis in adipocytes. Most notably, because altering cholesterol balance profoundly modifies adipocyte metabolism in a way resembling that seen in hypertrophied adipocytes, cholesterol imbalance is recognized as a characteristic for enlarged adipocytes per se in the obese state. In addition, plasma membrane cholesterol normalization by chromium picolinate can fully restore inslin-stimulated glucose transport, further supporting the role of the adipocyte cholesterol imbalance in obesity and insulin resistance. © 2009 International Association for the Study of Obesity.