Aims/hypothesis It is commonly thought that hyperglycaemia results from insufficient compensation of insulin secretion for insulin resistance. To verify this hypothesis, we assessed beta cell function and insulin sensitivity (IS) in a large cohort of volunteers with normal glucose tolerance (NGT) or impaired glucose regulation (IGR), i.e. impaired glucose tolerance or impaired fasting glucose. Methods In men and women with NGT (n=1,123) or IGR (n=156) (age 44±8 years, BMI 25±4 kg/m 2 , mean ± SD) we measured: (1) IS by clamp; (2) insulin secretion rates (ISR) and beta cell glucose sensitivity (=slope of the insulin secretion/plasma glucose dose-response) by C-peptide deconvolution and OGTT modelling; and (3) acute insulin response to intravenous glucose. Results After controlling for centre, sex, age and BMI, fasting and total ISR were inversely related to IS in both groups, whereas beta cell glucose sensitivity was not. Acute insulin response was reciprocally related to IS in both groups, but the relationships were incompatible with inadequate compensation and significance was lost after controlling for fasting ISR. In IGR vs NGT, IS was impaired (92 [75] , p<0.0001), whereas fasting and total ISR were increased (35% and 25%, respectively, p< 0.0001). In fully adjusted models, beta cell glucose sensitivity was the strongest determinant of OGTT glucose levels. Conclusions/interpretation Insulin resistance normally upregulates the secretory tone, with no evidence of defective compensation in IGR. In contrast, beta cell glucose sensitivity is independent of insulin resistance, but a key determinant of glucose tolerance. This suggests that hyperglycaemia results from an intrinsic beta cell defect rather than from inadequate compensation for insulin resistance.