Peripheral insulin resistance and impaired insulin action are the primary characteristics of type 2 diabetes. The first observable defect in this major disorder occurs in muscle, where glucose disposal in response to insulin is impaired. We have developed a transgenic mouse with a dominant-negative insulin-like growth factor-I receptor (KR–IGF-IR) specifically targeted to the skeletal muscle. Expression of KR–IGF-IR resulted in the formation of hybrid receptors between the mutant and the endogenous IGF-I and insulin receptors, thereby abrogating the normal function of these receptors and leading to insulin resistance. Pancreatic β-cell dysfunction developed at a relative early age, resulting in diabetes. These mice provide an excellent model to study the molecular mechanisms underlying the development of human type 2 diabetes.