An imbalance in microbial homeostasis, referred to as dysbiosis, is critically associated with the progression of obesity-induced metabolic disorders including type 2 diabetes (T2D). Alteration in gut microbial diversity and the abundance of pathogenic bacteria disrupt metabolic homeostasis and potentiate chronic inflammation, due to intestinal leakage or release of a diverse range of microbial metabolites. The obesity-associated shifts in gut microbial diversity worsen the triglyceride and cholesterol level that regulates adipogenesis, lipolysis, and fatty acid oxidation. Moreover, an intricate interaction of the gut-brain axis coupled with the altered microbiome profile and microbiome-derived metabolites disrupt bidirectional communication for instigating insulin resistance. Furthermore, a distinct microbial community within visceral adipose tissue is associated with its dysfunction in obese T2D individuals. The specific bacterial signature was found in the mesenteric adipose tissue of T2D patients. Recently, it has been shown that in Crohn’s disease, the gut-derived bacterium Clostridium innocuum translocated to the mesenteric adipose tissue and modulates its function by inducing M2 macrophage polarization, increasing adipogenesis, and promoting microbial surveillance. Considering these facts, modulation of microbiota in the gut and adipose tissue could serve as one of the contemporary approaches to manage T2D by using prebiotics, probiotics, or faecal microbial transplantation. Altogether, this review consolidates the current knowledge on gut and adipose tissue dysbiosis and its role in the development and progression of obesity-induced T2D. It emphasizes the significance of the gut microbiota and its metabolites as well as the alteration of adipose tissue microbiome profile for promoting adipose tissue dysfunction, and identifying novel therapeutic strategies, providing valuable insights and directions for future research and potential clinical interventions.