We investigated whether previously reported muscle mitochondrial dysfunction and altered gene transcript levels in type 2 diabetes might be secondary to abnormal blood glucose and insulin levels rather than an intrinsic defect of type 2 diabetes. A total of 13 type 2 diabetic and 17 nondiabetic subjects were studied on two separate occasions while maintaining similar insulin and glucose levels in both groups by 7-h infusions of somatostatin, low- or high-dose insulin (0.25 and 1.5 mU/kg of fat-free mass per min, respectively), and glucose. Muscle mitochondrial DNA abundance was not different between type 2 diabetic and nondiabetic subjects at both insulin levels, but the majority of transcripts in muscle that are involved mitochondrial functions were expressed at lower levels in type 2 diabetes at low levels of insulin. However, several gene transcripts that are specifically involved in the electron transport chain were expressed at higher levels in type 2 diabetic patients. After the low-dose insulin infusion, which achieved postabsorptive insulin levels, the muscle mitochondrial ATP production rate (MAPR) was not different between type 2 diabetic and nondiabetic subjects. However, increasing insulin to postprandial levels increased the MAPR in nondiabetic subjects but not in type 2 diabetic patients. The lack of MAPR increment in response to high-dose insulin in type 2 diabetic patients occurred in association with reduced glucose disposal and expression of peroxisome proliferator–activated receptor-γ coactivator 1α, citrate synthase, and cytochrome c oxidase I. In conclusion, the current data supports that muscle mitochondrial dysfunction in type 2 diabetes is not an intrinsic defect, but instead a functional defect related to impaired response to insulin.