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Non-diabetic and alloxan-induced diabetic rats were fed with standard laboratory food enriched with 20% virgin coconut oil for 16 weeks. In non-diabetic animals coconut oil improved insulin sensitivity and ability to control glycaemia and decreased the serum triglycerides for almost 50% in comparison with controls. Supplementation with coconut oil caused liver steatosis in both non-diabetic and diabetic animals. However, the severity of steatosis was lower in diabetic animals compared to non-diabetic animals. Coconut oil had no effects on heart histology, ascending and abdominal aorta wall thickening and atherosclerotic plaques development neither in non-diabetic nor in diabetic animals. While alloxan treatment caused Type I diabetes in rats, supplementation with coconut oil in combination with the alloxan unexpectedly resulted in Type II diabetes. The development of severe insulin resistance and deterioration in serum lipid profile implied that the use of coconut oil is contraindicated in diabetic condition.