Increased plasma non-esterified fatty acids (NEFAs) link obesity with insulin resistance and type 2 diabetes mellitus (T2DM). However, in contrast to the saturated FA (SFA) palmitic acid, the monounsaturated FA (MUFA) oleic acid elicits beneficial effects on insulin sensitivity, and the dietary palmitic acid:oleic acid ratio impacts diabetes risk in humans. Here we review recent mechanistic insights into the beneficial effects of oleic acid compared with palmitic acid on insulin resistance and T2DM, including its anti-inflammatory actions, and its capacity to inhibit endoplasmic reticulum (ER) stress, prevent attenuation of the insulin signaling pathway, and improve β cell survival. Understanding the molecular mechanisms of the antidiabetic effects of oleic acid may contribute to understanding the benefits of this FA in the prevention or delay of T2DM.