Type 2 diabetes is characterized by a progressive loss of beta-cell function throughout the course of the disease. The pattern of loss is an initial defect in early or first-phase insulin secretion, followed by a decreasing maximal capacity of glucose to potentiate all nonglucose signals. Last, a defective steady-state and basal insulin secretion develops, leading to complete beta-cell failure requiring insulin treatment. This functional loss exceeds the expected impact of a 20-50% loss of beta-cells reported at autopsy, which has been associated with amyloid deposits. This review summarizes the nature of the amyloid deposition process and its association with disproportionate hyperproinsulinemia. It reviews recent studies in IAPP (islet-amyloid polypeptide, or amylin) transgenic mice developing islet amyloid deposits and hyperglycemia to suggest that the process of amyloid fibril formation impairs function early and leads to beta-cell failure and eventual death. Based on the known association of amyloid deposits and relative hyperproinsulinemia, it is hypothesized that fibril formation begins during impaired glucose tolerance after other factors cause the initial defects in early insulin secretion and insulin action. Thus, the process that leads to beta-cell loss is implicated in the deposition of amyloid and the late unrelenting progressive hyperglycemia now found in all patients despite current therapies.