Hepatic lipid accumulation has been implicated in the development of insulin resistance, but translational evidence in humans is limited. We investigated the relationship between liver fat and tissue-specific insulin sensitivity in 133 obese subjects. Although the presence of hepatic steatosis in obese subjects was associated with hepatic, adipose tissue, and peripheral insulin resistance, we found that intrahepatic triglycerides were not strictly sufficient or essential for hepatic insulin resistance. Thus, to examine the molecular mechanisms that link hepatic steatosis to hepatic insulin resistance, we comprehensively analyzed liver biopsies from a subset of 29 subjects. Here, hepatic cytosolic diacylglycerol content, but not hepatic ceramide content, was increased in subjects with hepatic insulin resistance. Moreover, cytosolic diacylglycerols were strongly associated with hepatic PKCε activation, as reflected by PKCε translocation to the plasma membrane. These results demonstrate the relevance of hepatic diacylglycerol-induced PKCε activation in the pathogenesis of NAFLD-associated hepatic insulin resistance in humans.