The prevalence of obesity, insulin resistance and diabetes is increasing rapidly. Most patients with these disorders have hypertriglyceridaemia and increased plasma levels of fatty acids, which are taken up and stored in lipid droplets in the heart. Intramyocardial lipids that exceed the capacity for storage and oxidation can be lipotoxic and induce non‐ischaemic and non‐hypertensive cardiomyopathy, termed diabetic or lipotoxic cardiomyopathy. The clinical features of diabetic cardiomyopathy are cardiac hypertrophy and diastolic dysfunction, which lead to heart failure, especially heart failure with preserved ejection fraction. Although the pathogenesis of the cardiomyopathy is multifactorial, diabetic dyslipidaemia and intramyocardial lipid accumulation are the key pathological features, triggering cellular signalling and modifications of proteins and lipids via generation of toxic metabolic intermediates. Most clinical studies have shown no beneficial effect of anti‐diabetic agents and statins on outcomes in heart failure patients without atherosclerotic diseases, indicating the importance of identifying underlying mechanisms and early interventions for diabetic cardiomyopathy. Here, we summarize the molecular mechanisms of diabetic cardiomyopathy, with a special emphasis on cardiac lipotoxicity, and discuss the role of peroxisome proliferator‐activated receptor α and dysregulated fatty acid metabolism as potential therapeutic targets.