The finding of islet inflammation in type 2 diabetes (T2D) and its involvement in β cell dysfunction has further highlighted the significance of inflammation in metabolic diseases. The number of intra-islet macrophages is increased in T2D, and these cells are the main source of proinflammatory cytokines within islets. Multiple human studies of T2D have shown that targeting islet inflammation has the potential to be an effective therapeutic strategy. In this Review we provide an overview of the cellular and molecular mechanisms by which islet inflammation develops and causes β cell dysfunction. We also emphasize the regulation and roles of macrophage polarity shift within islets in the context of T2D pathology and β cell health, which may have broad translational implications for therapeutics aimed at improving islet function.