Type 2 diabetes is characterized by excessive lipid storage in skeletal muscle. Excessive intramyocellular lipid storage exceeds intracellular needs and induces lipotoxic events ultimately contributing to the development of insulin resistance. Lipid droplet (LD)-coating proteins may control proper lipid storage in skeletal muscle. Perilipin 2 (PLIN2/ADRP) is one of the most abundantly expressed LD-coating proteins in skeletal muscle. Here we examined the role of PLIN2 in myocellular lipid handling and insulin sensitivity by investigating the effects of in vitro PLIN2 knockdown and in vitro and in vivo overexpression. PLIN2 knockdown decreased LD formation and triacylglycerol storage, marginally increased FA oxidation, and increased incorporation of palmitate into diacylglycerols and phospholipids. PLIN2 overexpression in vitro increased intramyocellular TAG storage paralleled with improved insulin sensitivity. In vivo muscle-specific PLIN2 overexpression resulted in increased LD accumulation and blunted the high-fat diet-induced increase of OXPHOS protein content. Diacylglycerol levels were unchanged, while ceramide levels were increased. Despite the increased intramyocellular lipid accumulation, PLIN2 overexpression improved skeletal muscle insulin sensitivity. We conclude that PLIN2 is essential for lipid storage in skeletal muscle by enhancing the partitioning of excess FAs towards triacylglycerol storage in LDs thereby blunting lipotoxicity-associated insulin resistance.