The reversible nature of early type 2 diabetes has been demonstrated in in vivo human studies. Recent in vivo and in vitro studies of β-cell biology have established that the β-cell loses differentiated characteristics, including glucose-mediated insulin secretion, under metabolic stress. Critically, the β-cell dedifferentiation produced by long-term excess nutrient supply is reversible. Weight loss in humans permits restoration of first-phase insulin secretion associated with the return to normal of the elevated intrapancreatic triglyceride content. However, in type 2 diabetes of duration greater than 10 years, the cellular changes appear to pass a point of no return. This review summarizes the evidence that early type 2 diabetes can be regarded as a reversible β-cell response to chronic positive calorie balance.