Glucose effectiveness, the ability of glucose per se to suppress endogenous glucose production (EGP), is lost in type 2 diabetes mellitus (T2DM). Free fatty acids (FFA) may contribute to this loss of glucose effectiveness in T2DM by increasing gluconeogenesis (GNG) and impairing the response to hyperglycemia. Thus, we first examined the effects of increasing plasma FFA levels for 3, 6, or 16 h on glucose effectiveness in nondiabetic subjects. Under fixed hormonal conditions, hyperglycemia suppressed EGP by 61% in nondiabetic subjects. Raising FFA levels with Liposyn infusion for ≥3 h reduced the normal suppressive effect of glucose by one-half. Second, we hypothesized that inhibiting GNG would prevent the negative impact of FFA on glucose effectiveness. Raising plasma FFA levels increased gluconeogenesis by ∼52% during euglycemia and blunted the suppression of EGP by hyperglycemia. Infusion of ethanol rapidly inhibited GNG and doubled the suppression of EGP by hyperglycemia, thereby restoring glucose effectiveness. In conclusion, elevated FFA levels rapidly increased GNG and impaired hepatic glucose effectiveness in nondiabetic subjects. Inhibiting GNG could have therapeutic potential in restoring the regulation of glucose production in type 2 diabetes mellitus.