Intermuscular adipose tissue (IMAT) is increasingly recognized as a contributor to insulin resistance and metabolic dysfunction in type 2 diabetes (T2D). Accumulation of IMAT was found to correlate with impaired skeletal muscle insulin sensitivity, as well as a generally reduced muscle strength and physical performance in humans. Beyond serving as an energy depot at physiological levels, increased IMAT is thought to actively impair muscle metabolism through secretion of adipokines, cytokines and lipid intermediates that create an inflammatory environment and modulate insulin signaling pathways. This review discusses current evidence on the pathophysiological role of IMAT based on clinical studies, including interventions, and current mechanistic insight from biopsied human IMAT. We further explore traditional and emerging methods to investigate IMAT that could expand mechanistic understanding of IMAT-muscle-crosstalk, highlighting their strengths and limitations. Human in vitro co-culture-models are valuable future tools for dissecting cellular and molecular responses. Despite growing interest in IMAT as a potential key player in metabolic disease, uncertainty remains about its origin, regulation and functionality. We suggest further research to integrate and intertwine traditional imaging techniques, multi-omics characterization of IMAT biopsies and advanced, physiologically relevant human in vitro systems to close these knowledge gaps to develop therapeutic strategies targeting metabolic disease.