In type 2 diabetes mellitus, insulin resistance and an inadequate pancreatic β-cell response to the demands of insulin resistance lead to impaired insulin secretion and hyperglycemia. Pancreatic duodenal homeodomain-1 (PDX-1), a transcription factor required for normal pancreatic development, also plays a key role in normal insulin secretion by islets. To investigate the role of PDX-1 in islet compensation for insulin resistance, we examined glucose disposal, insulin secretion, and islet cell mass in mice of four different genotypes: wild-type mice, mice with one PDX-1 allele inactivated (PDX-1^+/−, resulting in impaired insulin secretion), mice with one GLUT4 allele inactivated (GLUT4^+/−, resulting in insulin resistance), and mice heterozygous for both PDX-1 and GLUT4 (GLUT4^+/−;PDX-1^+/−). The combination of PDX-1 and GLUT4 heterozygosity markedly prolonged glucose clearance. GLUT4^+/−;PDX-1^+/− mice developed β-cell hyperplasia but failed to increase their β-cell insulin content. These results indicate that PDX-1 heterozygosity (∼60% of normal protein levels) abrogates the β-cell's compensatory response to insulin resistance, impairs glucose homeostasis, and may contribute to the pathogenesis of type 2 diabetes.