Dipeptidyl peptidase IV (DPP IV) is a widely distributed physiological enzyme that can be found solubilized in blood, or membrane-anchored in tissues. DPP IV and related dipeptidase enzymes cleave a wide range of physiological peptides and have been associated with several disease processes including Crohn's disease, chronic liver disease, osteoporosis, multiple sclerosis, eating disorders, rheumatoid arthritis, cancer, and of direct relevance to this review, type 2 diabetes. Here, we place particular emphasis on two peptide substrates of DPP IV with insulin-releasing and antidiabetic actions namely, glucagon-like peptide-1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP). The rationale for inhibiting DPP IV activity in type 2 diabetes is that it decreases peptide cleavage and thereby enhances endogenous incretin hormone activity. A multitude of novel DPP IV inhibitor compounds have now been developed and tested. Here we examine the information available on DPP IV and related enzymes, review recent preclinical and clinical data for DPP IV inhibitors, and assess their clinical significance.