Type 2 diabetes is a complex metabolic disorder characterized by peripheral insulin resistance and impaired beta cell function. Insulin resistance is inherited as a non-mendelian trait. In genetically predisposed individuals, resistance of skeletal muscle and adipose tissue to insulin action precedes the onset of clinical diabetes, and is thought to contribute to hyperglycaemia by leading to impaired beta cell function and increased hepatic glucose production. It is not clear whether beta cell and liver defects are also genetically determined. To test the hypothesis that insulin resistance in muscle and fat is sufficient to cause type 2 diabetes in the absence of intrinsic beta cell and liver abnormality, we generated transgenic mice that were insulin-resistant in skeletal muscle and adipose tissue. These mice developed all the prodromal features of type 2 diabetes but, despite the compounded effect of peripheral insulin resistance and a mild impairment of beta cell function, failed to become diabetic. These findings indicate the need for a critical re-examination of the primary site(s) of insulin resistance in diabetes.