The purpose of this study was to examine longitudinally the relationship among glucose levels, pancreatic β-cell function, and insulin resistance in women at high risk for type 2 diabetes. Oral glucose tolerance tests (OGTTs) and intravenous glucose tolerance tests (IVGTTs) were performed at 15-month intervals for up to 5 years or until fasting plasma glucose exceeded 140 mg/dl in Hispanic women with recent gestational diabetes. Data were analyzed 1) to compare changes in insulin sensitivity, β-cell function, and glucose levels between women who had diabetes at one or more visits and women who remained diabetes free and 2) to determine longitudinal patterns of change in glucose levels and acute β-cell compensation for insulin resistance. Seventy-one women provided data from a total of 280 paired OGTTs and IVGTTs during a median follow-up of 46 months. Compared with the 47 women who remained free of diabetes, the 24 who either had diabetes (n = 9) or developed it during follow-up (n = 15) had higher baseline glucose levels and lower acute β-cell compensation for insulin resistance. Baseline insulin sensitivity was low in both groups and did not change significantly during follow-up. Fasting and 2-h glucose levels increased more rapidly in the diabetic group despite a decline in acute β-cell compensation that was significantly slower than the decline in women who did not develop diabetes. This paradox was explained by an accelerated rise in glucose levels for any decline in β-cell compensation when β-cell compensation reached ∼10% of normal, a level that was reached in the women who had or developed diabetes but not in the women who remained diabetes free. These findings define a pathogenesis for type 2 diabetes in one high-risk group that is characterized by a relatively long-term decline in acute β-cell compensation for chronic insulin resistance that is attended by slowly rising glucose levels. Only relatively late in this process do glucose levels rise rapidly and into the diabetic range.