It is now widely accepted, given the current weight of experimental evidence, that reactive oxygen species (ROS) contribute to cell and tissue dysfunction and damage caused by glucolipotoxicity in diabetes. The source of ROS in the insulin secreting pancreatic β‐cells and in the cells which are targets for insulin action has been considered to be the mitochondrial electron transport chain. While this source is undoubtably important, we provide additional information and evidence for NADPH oxidase‐dependent generation of ROS both in pancreatic β‐cells and in insulin sensitive cells. While mitochondrial ROS generation may be important for regulation of mitochondrial uncoupling protein (UCP) activity and thus disruption of cellular energy metabolism, the NADPH oxidase associated ROS may alter parameters of signal transduction, insulin secretion, insulin action and cell proliferation or cell death. Thus NADPH oxidase may be a useful target for intervention strategies based on reversing the negative impact of glucolipotoxicity in diabetes.