The 'thrifty phenotype' hypothesis proposes that the fetus adapts to an adverse intrauterine milieu by optimizing the use of a reduced nutrient supply to ensure survival. However, favoring the development of some organs over that of others leads to persistent alterations in the growth and function of developing tissues. Although this concept has been somewhat controversial, recent epidemiological, clinical and animal studies provide support for the developmental origins of disease hypothesis. Underlying mechanisms include reprogramming of the hypothalamic-pituitary-adrenal axis, islet development and insulin-signaling pathways. Emerging data indicates that epigenetic regulation of gene expression might also play a crucial role in the pathogenesis of type 2 diabetes in individuals who are growth retarded at birth.