OBJECTIVE Chronically high nonesterified fatty acids (NEFAs) are a marker of metabolic dysfunction and likely increase risk of type 2 diabetes. By comparison, n-3 fatty acids (FAs) have been shown to have various health benefits and may protect against disease development. In 5,697 participants of the Multi-Ethnic Study of Atherosclerosis (MESA), we examined whether serum levels of NEFAs relate to risk of incident type 2 diabetes and further tested whether plasma n-3 FA levels may interact with this relation. RESEARCH DESIGN AND METHODS NEFAs were measured in fasting serum using an enzymatic colorimetric assay and phospholipid n-3 FAs eicosapentaenoic and docosahexaenoic acids were determined in plasma through gas chromatography-flame ionization detection in 5,697 MESA participants. Cox proportional hazards regression evaluated the association between NEFA levels and incident type 2 diabetes and whether plasma n-3 FAs modified this association adjusting for age, sex, race, education, field center, smoking, and alcohol use. RESULTS Over a mean 11.4 years of the study period, higher diabetes incidence was found across successive NEFA quartiles (Q) (hazard ratio [95% CI]): Q1, 1.0; Q2, 1.35 (1.07, 1.71); Q3, 1.58 (1.24, 2.00); and Q4, 1.86 (1.45, 2.38) (Ptrend < 0.001). A significant interaction of n-3 FAs on the relation between NEFAs and type 2 diabetes was also observed (Pinteraction = 0.03). For individuals with lower n-3 levels (<75th percentile), a higher risk of type 2 diabetes was observed across quartiles of NEFAs: Q1, 1.0; Q2, 1.41 (1.07, 1.84); Q3, 1.77 (1.35, 2.31); and Q4, 2.18 (1.65, 2.88) (Ptrend < 0.001). No significant associations were observed in those with n-3 FAs ≥75th percentile (Ptrend = 0.54). CONCLUSIONS NEFAs are a marker of type 2 diabetes and may have clinical utility for detecting risk of its development. The modifying influence of n-3 FAs suggests a protective effect against disease and/or metabolic dysfunction related to NEFAs and requires further study.