Hyperglycemia in Type 2 diabetes represents a steady-state re-regulation of plasma glucose to a higher-than-normal level after an overnight fast. The underlying pathophysiology represents an interaction between impaired beta-cell function and peripheral and hepatic insulin resistance which leads to abnormal hepatic glucose production. Subjects with the Metabolic Syndrome are at an increased risk for Type 2 diabetes and often have one or both of these disorders present even when glucose tolerance is normal. Thus, sophisticated measures of beta-cell function and insulin sensitivity demonstrate a high frequency in populations characterized as having a high prevalence of atherosclerosis, central obesity, hypertension, and dyslipidemia with or without impaired glucose tolerance. Hyperglycemia compensates for the impairment of beta-cell function and therefore, in our view, the beta-cell is the critical factor in its development. Hyperinsulinemia, a curvilinear compensation for insulin resistance that is closely correlated with central adiposity, is another important predictor of hyperglycemia. In a Japanese-American population followed for five years, impaired beta-cell function was present at baseline and preceded the accumulation of intraabdominal fat in those who developed Type 2 diabetes five years later. This interaction between these two pathophysiologic abnormalities in this sequence supports the hypothesis that beta-cell dysfunction contributes to the development of central adiposity by reduced CNS insulin signaling.