The ability of saturated fatty acids (SFA) to enhance milk yield in dairy cows may be due to shifts in glucose utilization by reducing insulin sensitivity in adipose and muscle tissues. Our objective was to evaluate the effects of palmitic acid (PA) on milk production and insulin sensitivity in cows. Twenty multiparous mid-lactation Holstein cows were enrolled in a 68-d study consisting of 3 sequential periods: 5-d covariate, 49-d treatment, and 14-d post. All cows received a sorghum silage-based diet pre- and post-treatment, and were randomly assigned to a common diet (control; no fat, n = 10; 138 ± 45 DIM) or PA at 4% of ration DM (98% PA; Palmit 98; Global Agri-Trade; n = 10; 136 ± 44 DIM). Blood and milk were collected at routine intervals. Intravenous glucose challenges (0.3 g/kg BW; GTT) were performed at d −1, 21, and 49 relative to start of treatments. Data were analyzed as repeated measures using a mixed model (fixed effects of treatment and time), and milk yield served as a covariate. Effects of PA are presented as changes relative to control. PA increased milk yield by wk 7 (30.8 vs. 24.6 kg/d, P < 0.05). PA increased milk fat yield (+22 and +18%; P < 0.05) and 3.5%-FCM (+19 and +18%; P < 0.05) by wk 3 and 7, respectively. PA had no effect on milk protein or lactose content, MUN, SCC, or BW, but increased milk protein yield by wk 7 (P = 0.05). PA tended to increase estimated energy balance by wk 7 (P = 0.06). PA increased feed efficiency (+10%; 3.5%-FCM/DMI; P < 0.05). By d 68, 3.5%-FCM remained elevated in PA cows (P < 0.05), while milk yield and components were not different. PA increased plasma NEFA by 48, 93, and 60% by d 4, 6, and 8 (P < 0.05), respectively, and had no effect thereafter. PA did not modify plasma insulin or glucose, but reduced estimated insulin sensitivity wk 1 (e.g., −35% on d 8; P < 0.01). PA did not modify glucose disposal following GTT; however, PA reduced glucose-stimulated NEFA disappearance by wk 7 (P < 0.05). Our data suggest that increased milk yield with PA supplementation may be due in part to alterations in insulin sensitivity.