Skeletal muscle insulin resistance is the earliest defect in type 2 diabetes (T2D), preceding and predicting disease development. To what extent this reflects a primary defect or is secondary to tissue cross talk due to changes in hormones or circulating metabolites is unknown. To address this question, we have developed an in vitro disease-in-a-dish model using iPS cells from T2D patients differentiated into myoblasts (iMyos). We find that T2D iMyos in culture exhibit multiple defects mirroring human disease, including an altered insulin signaling, decreased insulin-stimulated glucose uptake, and reduced mitochondrial oxidation. More strikingly, global phosphoproteomic analysis reveals a multidimensional network of signaling defects in T2D iMyos going beyond the canonical insulin-signaling cascade, including proteins involved in regulation of Rho GTPases, mRNA splicing and/or processing, vesicular trafficking, gene transcription, and chromatin remodeling. These cell-autonomous defects and the dysregulated network of protein phosphorylation reveal a new dimension in the cellular mechanisms underlying the fundamental defects in T2D.