Elevated serum levels of acute-phase proteins, indicating chronic subclinical inflammation, have been associated with cardiovascular disease as well as the insulin resistance syndrome. Chronic inflammation may also be a risk factor for developing type 2 diabetes. We studied the concentrations of C-reactive protein (CRP), fibrinogen, and plasminogen activator inhibitor-1 (PAI-1) in 1,047 nondiabetic subjects in relation to incident diabetes within 5 years in the Insulin Resistance Atherosclerosis Study. Subjects with diabetes at follow-up (n = 144) had higher baseline levels of fibrinogen (mean ± SD; 287.8 ± 58.8 vs. 275.1 ± 56.0 mg/dl; P = 0.013) as well as of CRP (median [interquartile range]; 2.40 [1.29, 5.87] vs. 1.67 mg/l [0.75, 3.41]; P = 0.0001) and PAI-1 (24 [15, 37.5] vs. 16 ng/ml [9, 27]; P = 0.0001) than nonconverters. The odds ratio (OR) of converting to diabetes was significantly increased with increasing baseline concentrations of the inflammatory markers. In contrast to PAI-1, the association of CRP and fibrinogen with incident diabetes was significantly attenuated after adjustment for body fat (BMI or waist circumference) or insulin sensitivity (S_I), as assessed by a frequently sampled intravenous glucose tolerance test. In a logistic regression model that included age, sex, ethnicity, clinical center, smoking, BMI, S_I, physical activity, and family history of diabetes, PAI-1 still remained significantly related to incident type 2 diabetes (OR [95% CI] for 1 SD increase: 1.61 [1.20–2.16]; P = 0.002). Chronic inflammation emerges as a new risk factor for the development of type 2 diabetes; PAI-1 predicts type 2 diabetes independent of insulin resistance and other known risk factors for diabetes.