Type 2 diabetes is caused by progressively increasing insulin resistance coupled with deteriorating beta-cell function, and there is a growing body of evidence to suggest that both of these defects precede hyperglycaemia by many years. Several studies have demonstrated the importance of maintaining beta-cell function in patients with Type 2 diabetes. This review explores parameters used to indicate beta-cell dysfunction, in Type 2 diabetes and in individuals with a predisposition to the disease. A genetic element undoubtedly underlies beta-cell dysfunction; however, a number of modifiable components are also associated with beta-cell deterioration, such as chronic hyperglycaemia and elevated free fatty acids. There is also evidence for a link between pro-inflammatory cytokines and impairment of insulin-signalling pathways in the beta-cell, and the potential role of islet amyloid deposition in beta-cell deterioration continues to be a subject for debate. The thiazolidinediones are a class of agents that have demonstrated clinical improvements in indices of beta-cell dysfunction and have the potential to improve beta-cell function. Data are accumulating to show that this therapeutic group offers a number of advantages over traditionally employed oral agents, and these data demonstrate the growing importance of thiazolidinediones in Type 2 diabetes management.