Bile acids (BAs) exert pleiotropic metabolic effects, and physicochemical properties of different BAs affect their function. In rodents, insulin regulates BA composition, in part by regulating the BA 12α-hydroxylase CYP8B1. However, it is unclear whether a similar effect occurs in humans. To address this question, we examined the relationship between clamp-measured insulin sensitivity and plasma BA composition in a cohort of 200 healthy subjects and 35 type 2 diabetic (T2D) patients. In healthy subjects, insulin resistance (IR) was associated with increased 12α-hydroxylated BAs (cholic acid, deoxycholic acid, and their conjugated forms). Furthermore, ratios of 12α-hydroxylated/non–12α-hydroxylated BAs were associated with key features of IR, including higher insulin, proinsulin, glucose, glucagon, and triglyceride (TG) levels and lower HDL cholesterol. In T2D patients, BAs were nearly twofold elevated, and more hydrophobic, compared with healthy subjects, although we did not observe disproportionate increases in 12α-hydroxylated BAs. In multivariate analysis of the whole dataset, controlling for sex, age, BMI, and glucose tolerance status, higher 12α-hydroxy/non–12α-hydroxy BA ratios were associated with lower insulin sensitivity and higher plasma TGs. These findings suggest a role for 12α-hydroxylated BAs in metabolic abnormalities in the natural history of T2D and raise the possibility of developing insulin-sensitizing therapeutics based on manipulations of BA composition.