Only in the last decade did modeling studies predict, and knockout experiments confirm, that type 2 diabetes is a "2-hit" disease in which insulin resistance is necessarily accompanied by beta-cell defect(s) preventing the compensatory upregulation of insulin secretion. This long- delayed insight was associated with the development of a constant, the "disposition index," describing the beta-cell sensitivity-secretion relationship as a rectangular hyperbola. Shifts in insulin sensitivity are accompanied by compensatory alterations in beta-cell sensitivity to glucose. Insulin-sensitive subjects do not require a massive insulin response to exogenous glucose to maintain a normal blood glucose. But if their insulin sensitivity decreases by 80%, as in late pregnancy, they need a fivefold greater insulin response to achieve an identical disposition index. Women with gestational diabetes have an insulin response similar to that of normal volunteers; at first glance, this suggests similar islet function, but the utility of the disposition index is to normalize this response to the amplitude of third trimester insulin resistance, revealing severe beta-cell deficiency. The index is a quantitative, convenient, and accurate tool in analyzing epidemiologic data and identifying incipient impaired glucose tolerance. Separate major issues remain, however: the causes of insulin resistance, the causes of the failure of adequate beta-cell compensation in type 2 diabetes, and the nature of the signal(s) from insulin-resistant tissues that fail to elicit the appropriate beta-cell increment in sensitivity to glucose and other stimuli. The disposition index is likely to remain the most accurate physiologic measure for testing hypotheses and solutions to these challenges in whole organisms.