This review considers the epidemiologic evidence of an increasing incidence of type 2 diabetes in youth, the classification and diagnostic issues related to diabetes in young populations, pathophysiologic mechanisms relevant to the increasing incidence, the role of genetics and environment, and the community challenge for prevention and treatment. Type 2 diabetes in youth has been recognized to be frequent in populations of native North Americans and to comprise some 30 percent of new cases of diabetes in the 2nd decade of life, largely accounted for by minority populations and associated with obesity. Among Japanese schoolchildren, type 2 diabetes is seven times more common than type 1, and its incidence has increased more than 30-fold over the past 20 years, concomitant with changing food patterns and increasing obesity rates. The forms of diabetes seen in children and youth include typical type 1, occurring in all races; type 2, seen predominantly in minority youth; atypical diabetes, seen as an autosomal dominantly transmitted disorder in African-American populations; and maturity-onset diabetes of the young (MODY), seen rarely and only in Caucasians. Of the nonautoimmune forms of diabetes seen in youth, only type 2 diabetes is increasing in incidence. Proper classification requires consideration of onset (acute/severe versus insidious), ethnicity, family history, presence of obesity, and if necessary, studies of diabetes related autoimmunity. Insulin resistance predicts the development of diabetes in Pima Indians, in offspring of parents with type 2 diabetes, and in other high-risk populations. African-American children and youth have greater insulin responses during glucose tolerance testing and during hyperglycemic clamp study than do whites. There is also evidence of altered beta-cell function preceding the development of hyperglycemia. Of particular interest is the evidence that abnormal fetal and infantile nutrition is associated with the development of type 2 diabetes in adulthood. The thrifty phenotype hypothesis states that poor nutrition in fetal and infant life is detrimental to the development and function of the beta-cells and insulin sensitive tissues, leading to insulin resistance under the stress of obesity. The thrifty genotype hypothesis proposes that defective insulin action in utero results in decreased fetal growth as a conservation mechanism, but at the cost of obesity-induced diabetes in later childhood or adulthood. The vast majority of type 2 diabetes in adults is polygenic and associated with obesity. Monogenic forms (MODY, maternally transmitted mitochondrial mutations) are rare, but are more likely to appear in childhood. Linkage studies of the common polygenic type 2 diabetes have emphasized the heterogeneity of the disorder. The prevention and treatment of type 2 diabetes in children and youth is a daunting challenge because of the enormous behavioral influence, difficulty in reversing obesity, and typical nonadherence in this age-group. The emerging epidemic of type 2 diabetes in the pediatric population, especially among minorities whose proportion in the U.S. population is increasing, presents a serious public health problem. The full effect of this epidemic will be felt as these children become adults and develop the long-term complications of diabetes.