Intermuscular adipose tissue (IMAT) is negatively related to insulin sensitivity, but a causal role of IMAT in the development of insulin resistance is unknown. IMAT was sampled in humans to test for the ability to induce insulin resistance in vitro and characterize gene expression to uncover how IMAT may promote skeletal muscle insulin resistance. Human primary muscle cells were incubated with conditioned media from IMAT, visceral (VAT), or subcutaneous adipose tissue (SAT) to evaluate changes in insulin sensitivity. RNAseq analysis was performed on IMAT with gene expression compared with skeletal muscle and SAT, and relationships to insulin sensitivity were determined in men and women spanning a wide range of insulin sensitivity measured by hyperinsulinemic-euglycemic clamp. Conditioned media from IMAT and VAT decreased insulin sensitivity similarly compared with SAT. Multidimensional scaling analysis revealed distinct gene expression patterns in IMAT compared with SAT and muscle. Pathway analysis revealed that IMAT expression of genes in insulin signaling, oxidative phosphorylation, and peroxisomal metabolism related positively to donor insulin sensitivity, whereas expression of macrophage markers, inflammatory cytokines, and secreted extracellular matrix proteins were negatively related to insulin sensitivity. Perilipin 5 gene expression suggested greater IMAT lipolysis in insulin-resistant individuals. Combined, these data show that factors secreted from IMAT modulate muscle insulin sensitivity, possibly via secretion of inflammatory cytokines and extracellular matrix proteins, and by increasing local FFA concentration in humans. These data suggest IMAT may be an important regulator of skeletal muscle insulin sensitivity and could be a novel therapeutic target for skeletal muscle insulin resistance.