Inflammation has been implicated as an important aetiological factor in the development of both insulin resistance and type 2 diabetes mellitus. This conclusion is predominantly drawn from studies demonstrating associations between elevated (but normal range) levels of circulating acute phase inflammatory markers, typified by C-reactive protein (CRP), and indices of insulin resistance and the development of type 2 diabetes. There is debate as to whether these associations are independent of body fatness or, rather, an epiphenomenon of obesity, particularly central obesity, a strong predictor of insulin resistance and type 2 diabetes and an important source of inflammatory cytokines, such as interleukin-6. Some of this controversy and the inability to draw definitive conclusions from these studies relate to the fact that most studies measure body fat and its distribution indirectly using anthropometric estimates, such as Body Mass Index and waist circumference, rather than directly by dual-energy X-ray absorptiometry, computed tomography or magnetic resonance imaging. Furthermore, use of the term inflammation may be inappropriate when describing mild elevations of CRP in the normal range in the absence of the other changes that characterise classical inflammatory diseases, such as a reduction in levels (or evidence of consumption) of complement proteins. Debate as to whether obesity mediates the association between circulating levels of inflammatory markers and insulin resistance can be resolved by well-designed studies using body fat measured by gold-standard methods. In this review, we present evidence to support the suggestion that body fat is the primary determinant of circulating inflammatory marker levels in the basal state and that marginally elevated levels of circulating interleukin-6 and CRP in obesity are a consequence rather than a cause of insulin resistance. The importance of genetic influences in determining both body fatness and circulating CRP levels will also be discussed. The review will conclude with a discussion of possible mechanisms linking body fat and insulin resistance to elevated circulating levels of inflammatory markers, including the possible role of the toll-like family of immune receptors.