This article proposes five stages in the progression of diabetes, each of which is characterized by different changes in beta-cell mass, phenotype, and function. Stage 1 is compensation: insulin secretion increases to maintain normoglycemia in the face of insulin resistance and/or decreasing beta-cell mass. This stage is characterized by maintenance of differentiated function with intact acute glucose-stimulated insulin secretion (GSIS). Stage 2 occurs when glucose levels start to rise, reaching approximately 5.0-6.5 mmol/l; this is a stable state of beta-cell adaptation with loss of beta-cell mass and disruption of function as evidenced by diminished GSIS and beta-cell dedifferentiation. Stage 3 is a transient unstable period of early decompensation in which glucose levels rise relatively rapidly to the frank diabetes of stage 4, which is characterized as stable decompensation with more severe beta-cell dedifferentiation. Finally, stage 5 is characterized by severe decompensation representing a profound reduction in beta-cell mass with progression to ketosis. Movement across stages 1-4 can be in either direction. For example, individuals with treated type 2 diabetes can move from stage 4 to stage 1 or stage 2. For type 1 diabetes, as remission develops, progression from stage 4 to stage 2 is typically found. Delineation of these stages provides insight into the pathophysiology of both progression and remission of diabetes.