The mitochondria-associated ER membrane (MAM) is a specialized subdomain of ER that physically connects with mitochondria. Although disruption of inter-organellar crosstalk via the MAM impairs cellular homeostasis, its pathological significance in insulin resistance in type 2 diabetes mellitus remains unclear. Here, we reveal the importance of reduced MAM formation in the induction of fatty acid-evoked insulin resistance in hepatocytes. Palmitic acid (PA) repressed insulin-stimulated Akt phosphorylation in HepG2 cells within 12h. Treatment with an inhibitor of the ER stress response failed to restore PA-mediated suppression of Akt activation. Mitochondrial reactive oxygen species (ROS) production did not increase in PA-treated cells. Even short-term exposure (3h) to PA reduced the calcium flux from ER to mitochondria, followed by a significant decrease in MAM contact area, suggesting that PA suppressed the functional interaction between ER and mitochondria. Forced expression of mitofusin-2, a critical component of the MAM, partially restored MAM contact area and ameliorated the PA-elicited suppression of insulin sensitivity with Ser473 phosphorylation of Akt selectively improved. These results suggest that loss of proximity between ER and mitochondria, but not perturbation of homeostasis in the two organelles individually, plays crucial roles in PA-evoked Akt inactivation in hepatic insulin resistance.