Chronic, unresolved tissue inflammation is a well-described feature of obesity, type 2 diabetes mellitus (T2DM) and other insulin-resistant states. In this context, adipose tissue and liver inflammation have been particularly well studied; however, abundant evidence demonstrates that inflammatory processes are also activated in pancreatic islets from obese animals and humans with obesity and/or T2DM. In this Review, we focus on the characteristics of immune cell-mediated inflammation in islets and the consequences of this with respect to β-cell function. In contrast to type 1 diabetes mellitus, the dominant immune cell type causing inflammation in obese and T2DM islets is the macrophage. The increased macrophage accumulation in T2DM islets primarily arises through local proliferation of resident macrophages, which then provide signals (such as platelet-derived growth factor) that drive β-cell hyperplasia (a classic feature of obesity). In addition, islet macrophages also impair the insulin secretory capacity of β-cells. Through these mechanisms, islet-resident macrophages underlie the inflammatory response in obesity and mechanistically participate in the β-cell hyperplasia and dysfunction that characterizes this insulin-resistant state. These findings point to the possibility of therapeutics that target islet inflammation to elicit beneficial effects on β-cell function and glycaemia.