HDL protects against atherosclerosis development. Defective functioning of HDL in type 2 diabetes may be one cause of increased cardiovascular disease associated with type 2 diabetes. HDL modulates LDL oxidation through the action of paraoxonase-1 (PON1), which is one of the major mechanisms by which HDL is antiatherogenic. We have compared the ability of HDL from people with type 2 diabetes (n = 36) with no coronary heart disease (CHD) to metabolize oxidized palmitoyl arachidonyl phosphatidylcholine (ox-PAPC), a major product of LDL oxidation and a PON1 substrate, with that of HDL isolated from healthy control subjects (n = 19) and people with CHD but no diabetes (n = 37). HDL from people with type 2 diabetes metabolized 11% less ox-PAPC, and HDL from people with CHD metabolized 6% less, compared with HDL from control subjects (both P < 0.01). The ability of HDL from control and type 2 diabetic subjects containing the PON1-192RR alloform to metabolize ox-PAPC was significantly reduced compared with PON1-192QQ or QR genotypes (P < 0.05). The defective ability of HDL to metabolize ox-PAPC was reflected in a significant increase in circulating plasma oxidized LDL concentration in the two patient groups (37 +/- 5, 53 +/- 7, and 65 +/- 7 mmol/l for control, CHD, and type 2 diabetic subjects, respectively; P < 0.001), with PON1-192RR genotype carriers having the highest concentrations. In the control group, there was a significant negative correlation between serum PON1 activity and oxidized LDL concentration (r = 0.856, P < 0.001); however, this correlation was not evident in the patient groups. HDL from type 2 diabetic subjects without CHD had a decreased ability to metabolize oxidized phospholipids, which could lead to increased susceptibility to develop cardiovascular disease.