Non-insulin-dependent diabetes mellitus (NIDDM) results from an imbalance between insulin sensitivity and insulin secretion. Both longitudinal and cross-sectional studies have demonstrated that the earliest detectable abnormality in NIDDM is an impairment in the body's ability to respond to insulin. Because the pancreas is able to appropriately augment its secretion of insulin to offset the insulin resistance, glucose tolerance remains normal. With time, however, the beta-cell fails to maintain its high rate of insulin secretion and the relative insulinopenia (i.e., relative to the degree of insulin resistance) leads to the development of impaired glucose tolerance and eventually overt diabetes mellitus. The cause of pancreatic "exhaustion" remains unknown but may be related to the effect of glucose toxicity in a genetically predisposed beta-cell. Information concerning the loss of first-phase insulin secretion, altered pulsatility of insulin release, and enhanced proinsulin-insulin secretory ratio is discussed as it pertains to altered beta-cell function in NIDDM. Insulin resistance in NIDDM involves both hepatic and peripheral, muscle, tissues. In the postabsorptive state hepatic glucose output is normal or increased, despite the presence of fasting hyperinsulinemia, whereas the efficiency of tissue glucose uptake is reduced. In response to both endogenously secreted or exogenously administered insulin, hepatic glucose production fails to suppress normally and muscle glucose uptake is diminished. The accelerated rate of hepatic glucose output is due entirely to augmented gluconeogenesis. In muscle many cellular defects in insulin action have been described including impaired insulin-receptor tyrosine kinase activity, diminished glucose transport, and reduced glycogen synthase and pyruvate dehydrogenase. The abnormalities account for disturbances in the two major intracellular pathways of glucose disposal, glycogen synthesis, and glucose oxidation. In the earliest stages of NIDDM, the major defect involves the inability of insulin to promote glucose uptake and storage as glycogen. Other potential mechanisms that have been put forward to explain the insulin resistance, include increased lipid oxidation, altered skeletal muscle capillary density/fiber type/blood flow, impaired insulin transport across the vascular endothelium, increased amylin, calcitonin gene-related peptide levels, and glucose toxicity.