Almost nine in 10 people are not aware of the risks of carrying extra fat around their waistline.
A survey of 12,000 Europeans found most had no idea that a thick waist was a sign of a build-up of a dangerous type of fat around the internal organs.
The report from GlaxoSmithKline, who make weight loss drug Alli, said this "visceral fat" is strongly linked with type 2 diabetes and heart disease.
Most people would lose weight once they found out the risk, the survey found.
Report author Dr Terry Maguire, honorary senior lecturer at Queen's University in Belfast, said people did not know that visceral fat, which you cannot see or feel and which sits around the organs in the abdomen, is there or that it poses a problem.
It is thought that the danger of visceral fat is related to the release of proteins and hormones that can cause inflammation, which in turn can damage arteries and enter the liver, and affect how the body breaks down sugars and fats.
Only a quarter of those questioned in the Europe-wide study thought being overweight was a risk to long-term health at all.
"Most overweight people still see themselves as having a body image issue not a health problem and they need to understand the health benefits of weight loss as well as the cosmetic results," he said.
Research has shown that waist circumference is a good indicator of visceral fat and therefore of a person's risk of diseases associated with being overweight, such as type 2 diabetes.
The report pointed out that when weight is lost visceral fat is more easily broken down for energy than the fat immediately under the skin and even a small amount of weight loss can cause a difference.
When asked about losing weight, two-thirds of respondents said they would go on a diet in the New Year.
But the report's co-author Professor David Haslam, chair of the UK National Obesity Forum, cautioned that steady sustainable weight loss is important and that crash diets were likely to be unsuccessful.
"They can actually do more harm than good," he said.
"Invariably weight is put back on, with some of the weight regained accumulating as visceral fat."
It comes as the Department of Health announced that more than 300 of the 1,500 babies who were likely to have been born this New Year's Day could be overweight or obese by the time they start school unless action is taken.
Professor Steve Field, chair of the Royal College of GPs, said most of the focus in recent years had been on weight.
"It is the weight around your belly which really does the harm.
"A lot of these things take a while to get into people's heads especially as there has been so much focus on weight and body mass index.
"I'm not surprised at the findings because it will take more than a few academic papers to really change people's minds."