Intramuscular triglyceride (IMTG) concentration is elevated in insulin resistant individuals, and was once thought to promote insulin resistance. However, endurance trained athletes have equivalent concentration of IMTG compared to individuals with type 2 diabetes, and have very low risk of diabetes, termed the "athlete's paradox". We now know that IMTG synthesis is positively related to insulin sensitivity, but the exact mechanisms for this are unclear. To understand the relationship between IMTG synthesis and insulin sensitivity, we measured IMTG synthesis in obese control subjects, endurance trained athletes, and individuals with type 2 diabetes during rest, exercise, and recovery. IMTG synthesis rates were positively related to insulin sensitivity, cytosolic accumulation of DAG, and decreased accumulation of C18:0 ceramide and glucosylceramide. Greater rates of IMTG synthesis in athletes were not explained by alterations in FFA concentration, DGAT1 mRNA expression or protein content. IMTG synthesis during exercise in Ob and T2D indicate utilization as a fuel despite unchanged content, while IMTG concentration decreased during exercise in athletes. mRNA expression for genes involved in lipid desaturation and IMTG synthesis were increased after exercise and recovery. Further, in a subset of individuals, exercise decreased cytosolic and membrane di-saturated DAG content, which may help explain insulin sensitization after acute exercise. These data suggest IMTG synthesis rates may influence insulin sensitivity by altering intracellular lipid localization, and decreasing specific ceramide species that promote insulin resistance.