Type 2 diabetes mellitus is a disease characterized by persistent and progressive deterioration of glucose tolerance. Both insulin resistance and impaired insulin secretion contribute to development of Type 2 diabetes. However, whilst insulin resistance is fully apparent in the pre-diabetic condition, impairment of insulin secretion worsens over the time, being paralleled by a progressive decline in both pancreatic B-cell function and B-cell mass. Intense research has identified a number of genetic variants that may predispose to impaired B-cell function, but such predisposition can be precipitated and worsened by toxic effects of hyperglycaemia (glucotoxicity) and elevated levels of free fatty acids (lipotoxicity). All these aspects of the pathogenesis of Type 2 diabetes are discussed in this review. Moreover, treatments that target reduction in glucotoxicity or lipotoxicity are outlined, including emerging strategies that target the role of glucagon-like peptide 1 and sodium glucose co-transporter 2.