We have shown previously that palmitate treatment of C2C12 skeletal muscle myotubes causes inhibition of the protein kinase B (PKB) pathway and hence reduces insulin-stimulated glycogen synthesis through the elevation of intracellular ceramide levels. Ceramide is known to activate both atypical protein kinase C (aPKC) ζ and protein phosphatase (PP) 2A, and each of these effectors has been reported to inhibit PKB. In the present study, palmitate pretreatment was found to elevate PP2A-like activity in myotubes and to prevent its inhibition by insulin. Incubation with the phosphatase inhibitor okadaic acid before insulin stimulation protected against the effect of the fatty acid on PKB phosphorylation. Palmitate was unable to inhibit PKB activity and glycogen synthesis in cells overexpressing the activated PKB mutant (T308D,S473D)-PKBα, which is unaffected by phosphatase. In contrast, PKB activity and glycogen synthesis were still inhibited by palmitate in cells overexpressing a membrane-targeted and, hence, activated PKB mutant that retains sensitivity to phosphatase. Although aPKC activity was also increased in palmitate-treated cells, overexpression of wild-type or kinase-dead aPKCζ did not alter the inhibitory effects of the lipid on either stimulation of PKB or glycogen synthesis by insulin. We conclude that palmitate disrupts insulin signaling in C2C12 myotubes by promoting PP2A-like activity and, therefore, the dephosphorylation of PKB, which in turn reduces the stimulation of glycogen synthesis.