Dietary intake of long-chain fatty acids (LCFAs) plays a causative role in insulin resistance and risk of diabetes. Whereas LCFAs promote lipid accumulation and insulin resistance, diets rich in medium-chain fatty acids (MCFAs) have been associated with increased oxidative metabolism and reduced adiposity, with few deleterious effects on insulin action. The molecular mechanisms underlying these differences between dietary fat subtypes are poorly understood. To investigate this further, we treated C2C12 myotubes with various LCFAs (16:0, 18:1n9, and 18:2n6) and MCFAs (10:0 and 12:0), as well as fed mice diets rich in LCFAs or MCFAs, and investigated fatty acid-induced changes in mitochondrial metabolism and oxidative stress. MCFA-treated cells displayed less lipid accumulation, increased mitochondrial oxidative capacity, and less oxidative stress than LCFA-treated cells. These changes were associated with improved insulin action in MCFA-treated myotubes. MCFA-fed mice exhibited increased energy expenditure, reduced adiposity, and better glucose tolerance compared with LCFA-fed mice. Dietary MCFAs increased respiration in isolated mitochondria, with a simultaneous reduction in reactive oxygen species generation, and subsequently low oxidative damage. Collectively our findings indicate that in contrast to LCFAs, MCFAs increase the intrinsic respiratory capacity of mitochondria without increasing oxidative stress. These effects potentially contribute to the beneficial metabolic actions of dietary MCFAs.