The significant rise in the prevalence of obesity in children and adolescents over the past three decades has led to a rise in the incidence of severe insulin resistance and consequently of type 2 diabetes in this age group. Type 2 diabetes is caused by a combination of increased insulin resistance and decreased insulin secretion. Peripheral insulin resistance is associated with lipid partitioning in specific compartments, i.e., viscera, muscle and liver, more than with obesity per se. The development of an insulin secretory defect is probably a secondary event evolving gradually. Initially only the first phase of insulin secretion is reduced, but later, in overt type 2 diabetes, poor early and late phase insulin secretion are noted as well as defective pro-insulin processing. As glucose metabolic defects deteriorate more rapidly in children than in adults, early identification of children with altered glucose metabolism is important in order to quantify public health needs and to allocate resources for appropriate prevention programs.