The prevalence and progression of type 2 diabetes have increased remarkably in postmenopausal women. Although estrogen replacement and exercise have been studied for their effect in modulating insulin sensitivity in the case of insufficient estrogen states, their effects on beta-cell function and mass have not been studied. Ovariectomized (OVX) female rats with 90% pancreatectomy were given a 30% fat diet for 8 wk with a corresponding administration of 17beta-estradiol (30 microg/kg body weight) and/or regular exercise. Amelioration of insulin resistance by estrogen replacement or exercise was closely related to body weight reduction. Insulin secretion in first and second phases was lower in OVX during hyperglycemic clamp, which was improved by estrogen replacement and exercise but not by weight reduction induced by restricted diets. Both estrogen replacement and exercise overcame reduced pancreatic beta-cell mass in OVX rats via increased proliferation and decreased apoptosis of beta-cells, but they did not exhibit an additive effect. However, restricted diets did not stimulate beta-cell proliferation. Increased beta-cell proliferation was associated with the induction of insulin receptor substrate-2 and pancreatic homeodomain protein-1 via the activation of the cAMP response element binding protein. Estrogen replacement and exercise shared a common pathway, which led to the improvement of beta-cell function and mass, via cAMP response element binding protein activation, explaining the lack of an additive effect with combined treatments. In conclusion, decreased beta-cell mass leading to impaired insulin secretion triggers glucose dysregulation in estrogen insufficiency, regardless of body fat. Regular moderate exercise eliminates the risk factors of contracting diabetes in the postmenopausal state.