A single-nucleotide polymorphism in the human arylamine N-acetyltransferase 2 (Nat2) gene has recently been identified as associated with insulin resistance in humans. To understand the cellular and molecular mechanisms by which alterations in Nat2 activity might cause insulin resistance, we examined murine ortholog Nat1 knockout (KO) mice. Nat1 KO mice manifested whole-body insulin resistance, which could be attributed to reduced muscle, liver, and adipose tissue insulin sensitivity. Hepatic and muscle insulin resistance were associated with marked increases in both liver and muscle triglyceride (TAG) and diacylglycerol (DAG) content, which was associated with increased PKCϵ activation in liver and increased PKCθ activation in skeletal muscle. Nat1 KO mice also displayed reduced whole-body energy expenditure and reduced mitochondrial oxygen consumption in white adipose tissue, brown adipose tissue, and hepatocytes. Taken together, these studies demonstrate that Nat1 deletion promotes reduced mitochondrial activity and is associated with ectopic lipid-induced insulin resistance. These results provide a potential genetic link among mitochondrial dysfunction with increased ectopic lipid deposition, insulin resistance, and type 2 diabetes.