Background: Circulating follistatin (Fst) binds activin A and thereby regulates biological functions such as muscle growth and β-cell survival. However, Fst and activin A’s implication in metabolic regulation is unclear. Objective: To investigate circulating Fst and activin A in obesity and type 2 diabetes (T2D) and determine their association with metabolic parameters. Further, to examine regulation of Fst and activin A by insulin and the influence of obesity and T2D hereon. Methods: Plasma Fst and activin A levels were analyzed in obese T2D patients (N = 10) closely matched to glucose-tolerant lean (N = 12) and obese (N = 10) individuals in the fasted state and following a 4-h hyperinsulinemic–euglycemic clamp (40 mU·m–2·min–1) combined with indirect calorimetry. Results: Circulating Fst was ~30% higher in patients with T2D compared with both lean and obese nondiabetic individuals (P < .001), while plasma activin A was unaltered. In the total cohort, fasting plasma Fst correlated positively with fasting plasma glucose, serum insulin and C-peptide levels, homeostasis model assessment of insulin resistance, and hepatic and adipose tissue insulin resistance after adjusting for age, gender and group (all r > 0.47; P < .05). However, in the individual groups these correlations only achieved significance in patients with T2D (not plasma glucose). Acute hyperinsulinemia at euglycemia reduced circulating Fst by ~30% (P < .001) and this response was intact in patients with T2D. Insulin inhibited FST expression in human hepatocytes after 2 h and even further after 48 h. Conclusions: Elevated circulating Fst, but not activin A, is strongly associated with measures of insulin resistance in patients with T2D. However, the ability of insulin to suppress circulating Fst is preserved in T2D.