Type 2 diabetes is an inflammatory, non-infectious disease characterized by dysfunctional pancreatic β-cells and insulin resistance. Although lifestyle, genetic, and environmental factors are associated with a high risk of type 2 diabetes, nutrition remains one of the most significant factors. Specific types and increased amounts of dietary fatty acids are associated with type 2 diabetes and its complications. Dietary recommendations for the prevention of type 2 diabetes advocate for a diet that is characterized by reduced saturated fatty acids and trans fatty acids alongside an increased consumption of monounsaturated fatty acids, polyunsaturated fatty acids, and omega-3 fatty acids. Although following the recommendations for dietary fatty acid intake is important for reducing type 2 diabetes and its related complications, the underlying mechanisms remain unclear. This review will provide an update on the mechanisms of action of fatty acids on glucose metabolism and type 2 diabetes, as well as dietary recommendations for the prevention of type 2 diabetes.