Type 2 diabetes is a strongly genetic disorder resulting from inadequate compensatory insulin secretion in the face of insulin resistance. The Zucker diabetic fatty (ZDF) rat is a model of type 2 diabetes and, like the human disease, has both insulin resistance (from a mutant leptin receptor causing obesity) and inadequate β-cell compensation. To test for an independently inherited β-cell defect, we examined β-cell function in fetuses of ZDF-lean rats, which have wild-type leptin receptors. β-Cell number and insulin content do not differ among wild-type, heterozygous, and homozygous ZDF-lean fetuses. However, insulin promoter activity is reduced 30-50% in homozygous ZDF-lean fetal islets, and insulin mRNA levels are similarly reduced by 45%. This is not a generalized defect in gene expression nor an altered transfection efficiency, because the islet amyloid polypeptide promoter and viral promoters are unaffected. Insulin promoter mapping studies suggest that the defect involves the critical A2-C1-E1 region. This study demonstrates that the ZDF rat carries a genetic defect in β-cell transcription that is inherited independently from the leptin receptor mutation and insulin resistance. The genetic reduction in β-cell gene transcription in homozygous animals likely contributes to the development of diabetes in the setting of insulin resistance.