Most children who are short or light at birth due to intrauterine growth restriction (IUGR) exhibit accelerated growth in infancy, termed "catch-up" growth, which together with IUGR, predicts increased risk of type 2 diabetes and obesity later in life. Placental restriction (PR) in sheep reduces size at birth, and also causes catch-up growth and increased adiposity at 6 wk of age. The physiological mechanisms responsible for catch-up growth after IUGR and its links to these adverse sequelae are unknown. Because insulin is a major anabolic hormone of infancy and its actions are commonly perturbed in these related disorders, we hypothesized that restriction of fetal growth would alter insulin secretion and sensitivity in the juvenile sheep at 1 month, which would be related to their altered growth and adiposity. We show that PR impairs glucose-stimulated insulin production, but not fasting insulin abundance or production in the young sheep. However, PR increases insulin sensitivity of circulating free fatty acids (FFAs), and insulin disposition indices for glucose and FFAs. Catch-up growth is predicted by the insulin disposition indices for amino acids and FFAs, and adiposity by that for FFAs. This suggests that catch-up growth and early-onset visceral obesity after IUGR may have a common underlying cause, that of increased insulin action due primarily to enhanced insulin sensitivity, which could account in part for their links to adverse metabolic and related outcomes in later life.