Indirect calorimetry is a method which allows the non-invasive measurement of energy expenditure and substrate utilization in humans. The procedure is described and the main equations to calculate energy expenditure and substrate utilization are presented. The limitations of the method include physiological effects, such as hyperventilation, and the influence of metabolic processes such as gluconeogenesis, ketogenesis and lipogenesis. The general principle is that intermediate processes do not influence overall conclusions, provided that the intermediate substrates which are formed do not accumulate within the body or are not excreted. Continuous measurements of metabolic rate and respiratory quotient using the ventilated hood system have been carried out during the last 5 years to study carbohydrate and lipid metabolism in lean subjects, in obese and diabetic patients. By using the euglycaemic insulin clamp technique or by giving oral glucose loads, it has been shown that the main effect of insulin on carbohydrate metabolism is to stimulate glucose storage. By raising plasma free fatty acid levels with a neutral fat infusion in lean subjects, both glucose oxidation and glucose storage were imparied during euglycaemic insulin clamps. Glucose storage was found to be markedly impaired in non-diabetic obese patients, during euglycaemic insulin clamps in the presence of elevated lipid oxidation. In obese diabetic patients, the impairment in glucose storage was more pronounced than in non-diabetic obese; this defect was particularly marked during euglycaemic insulin clamps, but it was also present after an oral glucose load. It is concluded that impairment of glucose storage is a major defect of glucose utilization in type II diabetes.