Carnitine acetyltransferase (CrAT) is a mitochondrial matrix enzyme that catalyzes the interconversion of acetyl-CoA and acetylcarnitine. Emerging evidence suggests that this enzyme functions as a positive regulator of total body glucose tolerance and muscle activity of pyruvate dehydrogenase (PDH), a mitochondrial enzyme complex that promotes glucose oxidation and is feedback inhibited by acetyl-CoA. Here, we used tandem mass spectrometry-based metabolic profiling to identify a negative relationship between CrAT activity and muscle content of lipid intermediates. CrAT specific activity was diminished in muscles from obese and diabetic rodents despite increased protein abundance. This reduction in enzyme activity was accompanied by muscle accumulation of long-chain acylcarnitines (LCACs) and acyl-CoAs and a decline in the acetylcarnitine/acetyl-CoA ratio. In vitro assays demonstrated that palmitoyl-CoA acts as a direct mixed-model inhibitor of CrAT. Similarly, in primary human myocytes grown in culture, nutritional and genetic manipulations that promoted mitochondrial influx of fatty acids resulted in accumulation of LCACs but a pronounced decrease of CrAT-derived short-chain acylcarnitines. These results suggest that lipid-induced antagonism of CrAT might contribute to decreased PDH activity and glucose disposal in the context of obesity and diabetes.