Type 2 diabetes mellitus is a complex disease characterized by beta-cell failure in the setting of insulin resistance. In early stages of the disease, pancreatic beta-cells adapt to insulin resistance by increasing mass and function. As nutrient excess persists, hyperglycemia and elevated free fatty acids negatively impact beta-cell function. This happens by numerous mechanisms, including the generation of reactive oxygen species, alterations in metabolic pathways, increases in intracellular calcium and the activation of endoplasmic reticulum stress. These processes adversely affect beta-cells by impairing insulin secretion, decreasing insulin gene expression and ultimately causing apoptosis. In this review, we will first discuss the regulation of beta-cell mass during normal conditions. Then, we will discuss the mechanisms of beta-cell failure, including glucotoxicity, lipotoxicity and endoplasmic reticulum stress. Further research into mechanisms will reveal the key modulators of beta-cell failure and thus identify possible novel therapeutic targets. Type 2 diabetes mellitus is a multifactorial disease that has greatly risen in prevalence in part due to the obesity and inactivity that characterize the modern Western lifestyle. Pancreatic beta-cells possess the potential to greatly expand their function and mass in both physiologic and pathologic states of nutrient excess and increased insulin demand. beta-cell response to nutrient excess occurs by several mechanisms, including hypertrophy and proliferation of existing beta-cells, increased insulin production and secretion, and formation of new beta-cells from progenitor cells [1, 2]. Failure of pancreatic beta-cells to adequately expand in settings of increased insulin demand results in hyperglycemia and diabetes. In this review, we will first discuss the factors involved in beta-cell growth and then discuss the mechanisms by which beta-cell expansion fails and leads to beta-cell failure and diabetes (Fig. 1).