By subtraction strategy and polymerase chain reaction amplification, two novel cDNAs, designated IA-2 and IA-2 beta, were cloned, sequenced and expressed. Both are transmembrane proteins belonging to the protein tyrosine phosphatase family and are expressed in pancreatic islets. Serological studies revealed that a high percentage of patients with IDDM have autoantibodies to IA-2/IA-2 beta and that the presence of these autoantibodies in otherwise normal individuals is highly predictive in identifying those at risk of ultimately developing clinical diabetes. Moreover, many patients who are ICA positive, but who do not have Abs to GAD65, have Abs to IA-2/IA-2 beta. Enzymatic cleavage of IA-2/IA-2 beta and serological analysis showed that IA-2 is the precursor of the 40 kDa tryptic fragment and IA-2 beta is the precursor of the 37 kDa tryptic fragment, both previously shown to be autoantigens. It is concluded that IA-2/IA-2 beta are major autoantigens in IDDM and together with GAD65 are responsible for much of the reactivity of ICA with pancreatic islets. Tests for the detection of autoantibodies to recombinant IA-2/IA-2 beta and recombinant GAD65 are likely to replace the ICA immunofluorescence test for population screening.