Although type 2 diabetes (T2D) is a risk factor for liver fibrosis in nonalcoholic fatty liver disease (NAFLD), the specific contribution of insulin resistance (IR) relative to other factors is unknown. Assess the impact on liver fibrosis in NAFLD of adipose tissue (adipose tissue insulin resistance index [adipo-IR]) and liver (Homeostatic Model Assessment of Insulin Resistance [HOMA-IR]) IR in people with T2D and NAFLD. Participants were screened by elastography in the outpatient clinics for hepatic steatosis and fibrosis, including routine metabolites, cytokeratin-18 (a marker of hepatocyte apoptosis/steatohepatitis), and HOMA-IR/adipo-IR. University ambulatory care practice. A total of 483 participants with T2D. Screening for steatosis and fibrosis with elastography. Liver steatosis (controlled attenuation parameter), fibrosis (liver stiffness measurement), and measurements of IR (adipo-IR, HOMA-IR) and fibrosis (cytokeratin-18). Clinically significant liver fibrosis (stage F ≥ 2 = liver stiffness measurement ≥8.0 kPa) was found in 11%, having more features of the metabolic syndrome, lower adiponectin, and higher aspartate aminotransferase (AST), alanine aminotransferase, liver fat, and cytokeratin-18 (P < 0.05-0.01). In multivariable analysis including just clinical variables (model 1), obesity (body mass index [BMI]) had the strongest association with fibrosis (odds ratio, 2.56; CI, 1.87-3.50; P < 0.01). When metabolic measurements and cytokeratin-18 were included (model 2), only BMI, AST, and liver fat remained significant. When fibrosis stage was adjusted for BMI, AST, and steatosis (model 3), only Adipo-IR remained strongly associated with fibrosis (OR, 1.51; CI, 1.05-2.16; P = 0.03), but not BMI, hepatic IR, or steatosis. These findings pinpoint to the central role of dysfunctional, insulin-resistant adipose tissue to advanced fibrosis in T2D, beyond simply BMI or steatosis. The clinical implication is that targeting adipose tissue should be the priority of treatment in NAFLD.