Effects of endogenously derived free fatty acids (FFAs) on rates of gluconeogenesis (GNG) (determined with ²H₂O), glycogenolysis (GL), and endogenous glucose production (EGP) were studied in 18 type 2 diabetic patients and in 7 nondiabetic control subjects under three experimental conditions: 1) during an 8-h fast (from 16–24 h after the last meal), when plasma FFA levels increased slowly; 2) during 4 h (from 16–20 h) of nicotinic acid (NA) administration (fasting plus NA), when plasma FFAs decreased acutely; and 3) during 4 h (from 20–24 h) after discontinuation of NA (FFA rebound), when plasma FFAs increased acutely. During fasting, FFAs increased from 636 to 711 μmol/l in type 2 diabetic patients and from 462 to 573 μmol/l in control subjects (P < 0.04), but GNG did not change in diabetic patients (6.9 vs. 6.5 μmol · kg^–1 · min^–1, P > 0.05) or in control subjects (5.1 vs. 5.4 μmol · kg^–1 · min^–1, P > 0.05). During fasting plus NA, FFAs decreased in diabetic patients and control subjects (from 593 to 193 and from 460 to 162 μmol/l, respectively); GNG decreased (from 6.1 to 4.2 and from 4.7 to 3.5 μmol · kg^–1 · min⁻¹), whereas GL decreased in diabetic patients (from 5.3 to 4.4 μmol · kg⁻¹ · min⁻¹) but increased in control subjects (from 5.4 to 7.2 μmol · kg⁻¹ min⁻¹). During the FFA rebound, FFAs increased in diabetic patients and control subjects (from 193 to 1,239 and from 162 to 1,491 μmol/l, respectively); GNG increased (from 4.2 to 5.4 and from 3.4 to 5.3 μmol · kg^–1 · min^–1 respectively), and GL decreased (from 4.4 to 3.4 and from 7.3 to 4.3 μmol · kg⁻¹ · min⁻¹, respectively). In summary, during an extended overnight fast, increasing plasma FFA levels stimulated GNG, whereas decreasing FFA levels inhibited GNG in both diabetic and control subjects; 20 h after the last meal, approximately one-third of GNG in both diabetic and control subjects was dependent on FFAs; and autoregulation of EGP by GL in response to decreasing GNG was impaired in diabetic patients.