The mechanisms linking obesity and inactivity to diabetes mellitus are unclear. Recent studies have shown associations of alanine aminotransferase (ALT) and gamma-glutamyltransferase (GGT) with diabetes. In a random sample of 3,789 British women aged 60-79 years, the authors examined the associations of obesity and physical activity with ALT and GGT (1999-2001). Both body mass index and waist:hip ratio were independently (of each other, physical activity, alcohol consumption, smoking, and childhood and adulthood social class) positively and linearly associated with ALT and GGT. In adjusted models, a one-standard-deviation increase in body mass index was associated with a 0.46-units/liter (95% confidence interval (CI): 0.16, 0.75) increase in ALT and a 2.14-units/liter (95% CI: 0.99, 3.30) increase in GGT. Similar results for a one-standard-deviation increase in waist:hip ratio were 13.96 (95% CI: 10.44, 17.48) for ALT and 39.44 (95% CI: 25.89, 52.98) for GGT. Frequency of physical activity was inversely and linearly associated with GGT in fully adjusted models, but the inverse association with ALT was attenuated towards the null after adjustment for body mass index and waist:hip ratio. Adjustment for ALT and GGT resulted in some attenuation of the strong linear associations of body mass index and waist:hip ratio with diabetes. These findings provide some support for the suggestion that the relation between obesity and diabetes is, at least in part, mediated by liver pathology.