The root cause of type 2 diabetes (T2D) is insulin resistance (IR), defined by the failure of cells to respond to circulating insulin to maintain lipid and glucose homeostasis. While the causes of whole-body insulin resistance are multifactorial, a major contributing factor is dysregulation of liver and adipose tissue function. Adipose dysfunction, particularly adipose tissue-IR (adipo-IR), plays a crucial role in the development of hepatic insulin resistance and the progression of metabolic dysfunction-associated steatotic liver disease (MASLD) in the context of T2D. In this review, we will focus on molecular mechanisms of hepatic insulin resistance and its association with adipose tissue function. A deeper understanding of the pathophysiological mechanisms of the transition from a healthy state to insulin resistance, impaired glucose tolerance, and T2D may enable us to prevent and intervene in the progression to T2D.