Intrauterine growth retardation (IUGR) has been linked to development of type 2 diabetes in adulthood. Using a rat model, we tested the hypothesis that uteroplacental insufficiency disrupts the function of the electron transport chain in the fetal beta-cell and leads to a debilitating cascade of events. The net result is progressive loss of beta-cell function and eventual development of type 2 diabetes in the adult. Studies in the IUGR rat demonstrate that an abnormal intrauterine environment induces epigenetic modifications of key genes regulating beta-cell development; experiments directly link chromatin remodeling with suppression of transcription. Future research will be directed at elucidating the mechanisms underlying epigenetic modifications in offspring.