Dysfunction of the pancreatic beta cell is an important defect in the pathogenesis of type 2 diabetes, although its exact relationship to the insulin resistance is unclear. To determine whether insulin signaling has a functional role in the beta cell we have used the Cre-loxP system to specifically inactivate the insulin receptor gene in the beta cells. The resultant mice exhibit a selective loss of insulin secretion in response to glucose and a progressive impairment of glucose tolerance. These data indicate an important functional role for the insulin receptor in glucose sensing by the pancreatic beta cell and suggest that defects in insulin signaling at the level of the beta cell may contribute to the observed alterations in insulin secretion in type 2 diabetes.