Defects in insulin action and insulin secretion are both present in type 2 diabetes, and both are believed to be genetically predetermined. In the absence of a defect in β-cell function, individuals can compensate indefinitely for insulin resistance with appropriate hyperinsulinemia, as observed even in obese populations such as the Pima Indians of Arizona. However, loss of β-cell function leads eventually to the postprandial and fasting hyperglycemia that characterizes type 2 diabetes. This progression occurs despite initially effective antidiabetic therapies, a situation clearly demonstrated by the United Kingdom Prospective Diabetes Study (UKPDS). External factors (access to high-calorie foods, lack of exercise, weight gain), the increased insulin requirements imposed by insulin resistance, and toxicities from hyperglycemia and elevated free fatty acids may all contribute to β-cell deterioration. Free fatty acids, resistin, and tumor necrosis factor (TNF)–⍺ potentially worsen the insulin resistance. β-Cell dysfunction resulting from glucose toxicity and lipotoxicity is potentially reversible with restoration of metabolic control. Therefore, attention to these toxicities may delay the deterioration of β-cell function and suggest new approaches to the management of type 2 diabetes.