Human type 2 diabetes is characterized by defects in both insulin action and insulin secretion, It has been difficult to identify a single molecular abnormality underlying these features, Insulin-receptor substrates (IRS proteins) may be involved in type 2 diabetes : they mediate pleiotropic signals initiated by receptors for insulin and other cytokines(1). Disruption of IRS-1 hl mice retards growth, but diabetes does not develop because insulin secretion increases to compensate for the mild resistance to insulin(2,3). Here we show that disruption of IRS-2 impairs both peripheral insulin signalling-and pancreatic beta-cell function. IRS-2-deficient mice show progressive deterioration of glucose homeostasis because of insulin resistance in the liver and skeletal muscle and a lack of beta-cell compensation for this insulin resistance, Our results indicate that dysfunction of IRS-2 may contribute to the pathophysiology of human type 2 diabetes.