Type 2 diabetes is a complex and heterogeneous disorder presently affecting more than 100 million people worldwide and causing serious socio-economic problems. Appropriate experimental models are essential tools for understanding the pathogenesis, complications, and genetic or environmental influences that increase the risks of type 2 diabetes and testing of various therapeutic agents. The animal models of type 2 diabetes can be obtained either spontaneously or induced by chemicals or dietary or surgical manipulations and/or by combination thereof. In recent years, large number of new genetically modified animal models including transgenic, generalized knock-out and tissue-specific knockout mice have been engineered for the study of diabetes. This review gives an overview on the animal models of type 2 diabetes with reference to their origin/source, characteristic features, underlying causes/mechanism(s), advantages and disadvantages to the investigators in diabetes research. In addition, it especially describes the appropriate selection and usefulness of different animal models in preclinical testing of various new chemical entities (NCEs) for the treatment of type 2 diabetes.