Abstract Disclosure: M.C. Petersen: None. G.I. Smith: None. J. Yu: None. R.A. Barve: Other; Self; Royalties; PercayAI. J. Yoshino: None. G.I. Shulman: None. S. Klein: Advisory Board Member; Self; Merck, Altimmune. Some people with obesity are resistant to the adverse metabolic effects of excess adiposity and are considered to have “metabolically healthy obesity” (MHO). However, the mechanisms responsible for MHO are not clear. We evaluated whole-body insulin sensitivity (glucose infusion rate/plasma insulin during a hyperinsulinemic-euglycemic clamp) and several putative factors that regulate insulin action, including skeletal muscle diacylglycerol (DAG) and ceramide content and transcriptomic profiles in abdominal subcutaneous adipose tissue (ASAT) and muscle, in three groups separated by adiposity and metabolic function: i) 20 adults with MHO (BMI = 38.6 ± 1.2 kg/m2, normal fasting glucose, oral glucose tolerance, hemoglobin A1c, and intrahepatic triglyceride content); ii) 20 adults with MUO (BMI= 39.5 ± 1.1 kg/m2, prediabetes and hepatic steatosis); and iii) 15 adults who were metabolically-healthy and lean (MHL, BMI= 22.7 ± 0.4 kg/m2). Insulin sensitivity progressively decreased from MHL to MHO to MUO [109 ± 7 to 72 ± 7 to 30 ± 2 (μg glucose/kg FFM/min)/(μU/mL), respectively]. Muscle plasma membrane and total cellular sn-1,2-DAG contents were greater in the MHO and MUO groups compared with the MHL group, with no difference between MHO and MUO groups. In contrast, muscle ceramide content in multiple compartments progressively increased from MHL to MHO to MUO and were inversely correlated with insulin sensitivity among all subjects (plasma membrane, r = -0.61; mitochondria, r = -0.56; endoplasmic reticulum, r = -0.51, all P < 0.001). In ASAT, the expression of genes involved in extracellular matrix (ECM) remodeling and inflammation were greater in MUO than MHO, whereas the expression of genes involved in lipogenesis was greater in MHO than MUO. Sparse partial least-squares discriminant analysis, a classification algorithm, was used to identify the features that best discriminated the MHO and MUO groups. Of 125 variables, fasting plasma C-peptide concentration and skeletal muscle mitochondrial ceramide content were the best discriminants of MHO and MUO. Muscle mitochondrial ceramide content was negatively correlated with muscle transcripts involved in mitochondrial structure/function (e.g., ATP5MG [r = -0.69, P < 0.0001] and MPC1 [r = -0.67, P < 0.0001]) and PAQR4 (r = -0.71, P < 0.0001), which encodes a ceramidase in the adiponectin receptor family. In addition, the muscle transcripts that positively correlated with muscle mitochondrial ceramide content were strongly enriched for ECM and TGFβ-related pathways. Conclusions: Greater whole-body insulin sensitivity in people with MHO than MUO is associated with alterations in adipose tissue and skeletal muscle biology, namely decreased markers of ASAT ECM remodeling and inflammation, decreased skeletal muscle ceramide content, and increased skeletal muscle expression of PAQR4 and genes associated with mitochondrial content/function. Presentation: Friday, June 16, 2023