Fasting hyperglycemia in subjects with NIDDM appears to be the final result of abnormalities in endogenous insulin secretion combined with diminished peripheral insulin action secondary to a combined receptor and postbinding defect in cellular insulin action and accelerated hepatic glucose production. Of these various abnormalities, the accelerated rate of hepatic glucose production appears to be of major importance in determining the overall severity of the hyperglycemia. The hyperglycemia, which is maintained by the accelerated rate of hepatic glucose release, appears to compensate for the decrease in insulin action at the level of the peripheral tissues, as well as the liver. Although this compensatory effect of hyperglycemia appears to match the decrease in insulin action in the peripheral tissues rather precisely, the compensation at the level of the liver does not totally restore normal homeostasis. These observations suggest that the liver and peripheral tissues are intimately linked via mechanisms that remain to be delineated. Recent observations of alterations in the activities of key rate-limiting enzymes in the pathway for oxidiative glucose metabolism suggest that an abundance of glucose precursors may be made in peripheral tissues, which then recycle to the liver to support and/or drive the accelerated rates of hepatic glucose production. Additional studies are clearly needed in these areas to further delineate these crucial issues. In a similar manner, the role of the liver in determining the success of various therapeutic modalities in these subjects appears to be of paramount importance. The data reviewed regarding the mechanisms of action of sulfonylurea agents indicate that the quality of glycemic control achieved in subjects treated with these agents is largely determined by the ability of the drug to lower the elevated rates of hepatic glucose production. This suggests that new compounds that are more effective in this regard will prove to be more efficacious.