The rapid increase in the prevalence of type 2 diabetes (T2D) represents a major challenge for health care delivery worldwide. Identification of genes influencing individual susceptibility to disease offers a route to better understanding of the molecular mechanisms underlying pathogenesis, a necessary prerequisite for the rational development of improved preventative and therapeutic methods. The past decade has seen substantial success in identifying genes responsible for monogenic forms of diabetes (notably, maturity-onset diabetes of the young), and, in patients presenting with early-onset diabetes, a precise molecular diagnosis is an increasingly important element of optimal clinical care. Progress in gene identification for more common, multifactorial forms of type 2 diabetes has been slower, but there is now compelling evidence that common variants in the PPARG, KCNJ11 and CAPN10 genes influence T2D-susceptibility, and positional cloning efforts within replicated regions of linkage promise to deliver additional components of inherited susceptibility. The challenge in the years to come will be to understand how T2D risk is influenced by the interaction of these variants with each other and with pertinent environmental factors encountered during gestation, childhood and adulthood; and to establish how best to apply this understanding to provide individuals with clinically-useful diagnostic, prognostic and therapeutic information.