Diabetes mellitus has now assumed epidemic proportions in many countries of the world. With the present population of 19.4 million diabetics, and approximately 60 million by the year 2025, India would rank first in its share of the global burden of diabetes. Diabetes mellitus is characterized by derangement in carbohydrate, protein, and fat metabolism caused by complete or relative insufficiency of insulin secretion and/or insulin action. There are two main forms of diabetes, type 1 (insulin-dependent diabetes mellitus) and type 2 (non-insulin-dependent diabetes mellitus). Insulin sensitizers (thiazolidinediones), new-generation insulin secretagogue (glimepiride), acarbose, and designer insulin (lispro and aspart) have enormously helped in achieving better metabolic control. Despite the great strides that have been made in the understanding and management of type 2 diabetes, insulin resistance and diabetes-related complications are increasing unabated. The present review not only updates our knowledge in delineating the molecular mechanism(s) causal to insulin sensitivity or resistance, but also provides clues for the prognosis of diabetes and its better management.