We examined the effect of insulin on the synthesis and degradation of muscle lipid pools [phospholipid (PL), diacylglycerol (DG), triacylglycerol (TG)] and palmitate oxidation in isolated resting and contracting (20 tetani/min) soleus muscles. Lipid metabolism was monitored using the previously defined pulse-chase procedure. At rest, insulin significantly increased total palmitate uptake into soleus muscle (+49%, P < 0.05), corresponding to enhanced DG (+60%, P < 0.05) and TG (+61%, P < 0.05) esterification, but blunted palmitate oxidation (-38%, P < 0.05) and TG hydrolysis (-34%, P < 0.05). During muscle contraction, when total palmitate uptake was increased, insulin further enhanced uptake (+21%, P < 0.05) and esterification of fatty acids (FA) to PL (+73%, P < 0.05), DG (+19%, P < 0.05), and TG (+161%, P < 0.01). Despite a profound shift in the relative partitioning of FA away from esterification and toward oxidation during contraction, the increase in palmitate oxidation and TG hydrolysis was significantly blunted by insulin [oxidation, -24% (P = 0.05); hydrolysis, -83% (P < 0.01)]. The effects of insulin on FA esterification (stimulation) and oxidation (inhibition) during contraction were reduced in the presence of the phosphatidylinositol 3-kinase inhibitor LY-294002. In summary, the effects of insulin and contraction on palmitate uptake and esterification are additive, while insulin opposes the stimulatory effect of contraction on FA oxidation and TG hydrolysis. Insulin's modulatory effects on muscle FA metabolism during contraction are mediated at least in part through phosphatidylinositol 3-kinase.