Abstract Context/Objective Impaired adipose tissue (AT) function might induce recent-onset type 2 diabetes (T2D). Understanding AT energy metabolism could yield novel targets for the treatment of T2D. Design/Patients Male patients with recently-diagnosed T2D and healthy male controls (CON) of similar abdominal subcutaneous AT (SAT)-thickness, fat mass, and age (n = 14 each), underwent hyperinsulinemic-euglycemic clamps with 6,6-2H2glucose and indirect calorimetry. We assessed mitochondrial efficiency (coupling: state 3/4o; proton leak: state 4o/u) via high-resolution respirometry in superficial (SSAT) and deep (DSAT) SAT-biopsies, hepatocellular lipids (HCL) and fat mass by proton-magnetic-resonance-spectroscopy and -imaging. Results T2D patients (known diabetes duration: 2.5 0.1; 5.0 years) had 43%, 44%, and 63% lower muscle insulin sensitivity (IS), metabolic flexibility (P < 0.01) and AT IS (P < 0.05), 73% and 31% higher HCL (P < 0.05), and DSAT-thickness (P < 0.001), but similar hepatic IS compared with CON. Mitochondrial efficiency was ~22% lower in SSAT and DSAT of T2D patients (P < 0.001) and ~8% lower in SSAT vs DSAT (P < 0.05). In both fat depots, mitochondrial coupling correlated positively with muscle IS and metabolic flexibility (r ≥ 0.40; P < 0.05), proton leak correlated positively (r ≥ 0.51; P < 0.01) and oxidative capacity negatively (r ≤ −0.47; P < 0.05) with fasting free fatty acids (FFA). Metabolic flexibility correlated positively with SAT-oxidative capacity (r ≥ 0.48; P < 0.05) and negatively with DSAT-thickness (r = −0.48; P < 0.05). DSAT-thickness correlated negatively with mitochondrial coupling in both depots (r ≤ −0.50; P < 0.01) and muscle IS (r = −0.59; P < 0.01), positively with FFA during clamp (r = 0.63; P < 0.001) and HCL (r = 0.49; P < 0.01). Conclusions Impaired mitochondrial function, insulin resistance, and DSAT expansion are AT abnormalities in recent-onset T2D that might promote whole-body insulin resistance and increased substrate flux to the liver.