An early insulin regimen ameliorates glucotoxicity but also lipotoxicity in type 2 diabetes; however, the underlying mechanism remains elusive. In the present study, we investigated the role of mitochondria in lipid regulation following early insulin administration in insulin-resistant skeletal muscle cells. Male C57BL/6 mice, fed a high-fat diet (HFD) for 8 weeks, were treated with insulin for 3 weeks, and L6 myotubes cultured with palmitate (PA) for 24 h were incubated with insulin for another 12 h. The results showed that insulin facilitated systemic glucose disposal and attenuated muscular triglyceride accumulation in vivo. Recovery of AMP-activated protein kinase (AMPK) phosphorylation, inhibition of sterol-regulated element binding protein-1c (SREBP-1c) and increased carnitine palmitoyltransferase‑1B (CPT1B) expression were observed after insulin administration. Moreover, increased ATP concentration and cellular energy charge elicited by over-nutrition were suppressed by insulin. Despite maintaining respiratory complex activities, insulin restored muscular uncoupling protein 3 (UCP3) protein expression in vitro and in vivo. By contrast, knockdown of UCP3 abrogated insulin-induced restoration of AMPK phosphorylation in vitro. Importantly, the PA-induced decrease in UCP3 was blocked by the proteasome inhibitor MG132, and insulin reduced UCP3 ubiquitination, thereby prohibiting its degradation. Our findings, focusing on energy balance, provide a mechanistic understanding of the promising effect of early insulin initiation on lipotoxicity. Insulin, by recovering UCP3 activity, alleviated energy surfeit and potentiated AMPK-mediated lipid homeostasis in skeletal muscle cells following exposure to PA and in gastrocnemius of mice fed HFD.