Intrauterine growth retardation has been linked to the development of type 2 diabetes in later life. The mechanisms underlying this phenomenon are unknown. We have developed a model of uteroplacental insufficiency, a common cause of intrauterine growth retardation, in the rat. Bilateral uterine artery ligation was performed on day 19 of gestation (term is 22 days) in the pregnant rat; sham-operated pregnant rats served as controls. Birth weights of intrauterine growth–retarded (IUGR) animals were significantly lower than those of controls until ∼7 weeks of age, when IUGR rats caught up to controls. Between 7 and 10 weeks of age, the growth of IUGR rats accelerated and surpassed that of controls, and by 26 weeks of age, IUGR rats were obese (P < 0.05 vs. controls). No significant differences were observed in blood glucose and plasma insulin levels at 1 week of age. However, between 7 and 10 weeks of age, IUGR rats developed mild fasting hyperglycemia and hyperinsulinemia (P < 0.05 vs. controls). At age 26 weeks, IUGR animals had markedly elevated levels of glucose (P < 0.05 vs. controls). IUGR animals were glucose-intolerant and insulin-resistant at an early age. First-phase insulin secretion in response to glucose was also impaired early in life in IUGR rats, before the onset of hyperglycemia. There were no significant differences in β-cell mass, islet size, or pancreatic weight between IUGR and control animals at 1 and 7 weeks of age. However, in 15-week-old IUGR rats, the relative β-cell mass was 50% that of controls, and by 26 weeks of age, β-cell mass was less than one-third that of controls (P < 0.05). The data presented here support the hypothesis that an abnormal intrauterine milieu can induce permanent changes in glucose homeostasis after birth and lead to type 2 diabetes in adulthood.