We propose that type 2 diabetes results from a vicious cycle of metabolically induced inflammation, impaired insulin responsiveness, and subsequent loss of homeostatic signaling. A crucial and previously under-recognized event contributing to this loss of homeostasis is a reduction in heat shock proteins (HSPs, or stress proteins). The central causal pathways of this cycle are the following: (a) obesity-driven inflammation promotes insulin resistance; (b) impaired insulin signaling in turn reduces the expression of HSPs, leaving tissues vulnerable to damage and allowing the accumulation of harmful proteins aggregates; and (c) resulting damage to the pancreatic beta-cell leads to further losses in insulin signaling, while a decline in anti-inflammatory HSPs allows inflammation to expand unhindered. Obesity and sedentary lifestyle perpetuate this cycle, while dieting and exercise forestall it by raising HSPs, reducing inflammation, and improving insulin signaling. Because HSP expression carries substantial metabolic costs, it is likely that an evolutionary history of high activity levels and resource scarcity selected for more conservative HSP expression than is appropriate for our current environment of caloric abundance.