The aim of this study is to study the relation between elevated liver enzymes and type 2 diabetes mellitus and whether or not could be a predictor for development of type 2 diabetes. This study was conducted on 85 subjects divided into 4 groups, group (A) (control group) 17 subjects not obese, diabetic or had a history or laboratory evidence of liver disease, group (B) 28 subjects obese, not diabetics and had not liver disease, group (C) 20 subjects obese, not diabetic, but had elevated liver enzymes, group (D) 20 subjects obese, type 2 diabetics and had no history of liver disease. All the groups subjected to the following investigations, fasting and postprandial plasma glucose, fasting serum insulin, plasma lipid profile, plasma hepatic enzymes AST, ALT and GGT and abdominal ultrasonography. The present study demonstrated that there is an independent association between hepatic steatosis and both hyperinsulinemia and insulin resistance after adjustment for both BMI and W/H ratio. Non-diabetic NAFLD patients have a significant positive correlation between elevated AST, ALT and the level of fasting serum insulin, insulin resistance, serum triglyceride level and BMI and a significant negative correlation to high density lipoprotein cholesterol level. We demonstrated also that, there is a non-significant correlation between elevated GGT level and all the previous variables. Also, we demonstrated that patients who receive insulin sensitizers have a more improving lipid profile and a lower serum insulin level.