OBJECTIVE: The development of type 2 diabetes is linked to insulin resistance coupled with a failure of pancreatic beta-cells to compensate by adequate insulin secretion. DESIGN: Here, we review studies obtained from genetically engineered mice that provide novel insights into the pathophysiology of insulin resistance. RESULTS: Knockout models with monogenic impairment in insulin action have highlighted the potential role for insulin signalling molecules in insulin resistance at a tissue-specific level. Polygenic models have strengthened the idea that minor defects in insulin secretion and insulin action, when combined, can lead to diabetes, emphasizing the importance of interactions of different genetic loci in the production of diabetes. Knockout models with tissue-specific alterations in glucose or lipid metabolism have dissected the individual contributions of insulin-responsive organs to glucose homeostasis. They have demonstrated the central role of fat as an endocrine tissue in the maintenance of insulin sensitivity and the development of insulin resistance. Finally, these models have shown the potential role of impaired insulin action in pancreatic beta-cells and brain in the development of insulin deficiency and obesity.