We examined the regulation of intracellular and intravascular lipolysis in vivo. In the first series of studies, plasma free fatty acids (FFA) were elevated moderately by heparin (plus approximately 600 mumol/l) in patients with non-insulin-dependent diabetes mellitus (NIDDM) and in normal subjects. The increase in plasma FFA increased plasma FFA oxidation "submaximally" (plasma FFA oxidation less than 100% of total lipid oxidation) in a plasma FFA concentration-dependent manner. The increase in plasma FFA oxidation significantly suppressed direct intracellular oxidation of FFA. In another group of patients with NIDDM, plasma FFA was markedly increased (plus approximately 1,500 mumol/l). Plasma FFA oxidation now accounted for all lipid oxidation. Compared with substrate oxidation rates observed at submaximally elevated plasma FFAs in the same subjects at similar insulin concentrations, total lipid oxidation increased, carbohydrate oxidation decreased, and total energy production increased. These data demonstrate the existence of an FFA-dependent insulin-independent feedback mechanism between FFA oxidation from intracellular and intravascular sources. Thus the preferred response of body tissues to a change in plasma FFA oxidation is a reciprocal change in direct intracellular FFA oxidation. Substrate competition between carbohydrate and lipid, as proposed by P. J. Randle et al. (Lancet 1:785, 1963), becomes operative after the capacity for regulation within components of lipid oxidation has been utilized.