To study the role of pancreatic beta-cell function in glucose intolerance and frank diabetes that sometimes develops in cirrhosis, the C-peptide response to a bolus IV injection of 1 mg of glucagon was measured in nine controls and in two groups of patients with cirrhosis. The first group comprised nine subjects with normal or high-normal fasting plasma glucose and no glycosuria; five of them had impaired glucose tolerance. The second group consisted of eight cirrhotics in whom frank diabetes had developed six to 48 months after the diagnosis of cirrhosis. They were characterized by fasting plasma glucose greater than 140 mg/dL and permanent glycosuria. No differences in the degree of liver impairment or portal-systemic shunting were observed between the two groups. Plasma glucose response to glucagon was similarly reduced in cirrhotic subjects. Basal C-peptide was high normal in patients with cirrhosis, and significantly increased in nondiabetic subjects. By contrast peak C-peptide levels and total C-peptide responses to glucagon were low normal in cirrhotics and significantly reduced in patients with cirrhosis and diabetes. In 14 patients the C-peptide response to a standard meal was also measured. It was significantly reduced in patients with cirrhosis and diabetes (six cases), as compared to cirrhotic subjects without diabetes. Peak C-peptide after IV glucagon significantly correlated with peak C-peptide after the meal (r = .927), or total C-peptide response to meal (r = .871). Impaired insulin secretion may add to insulin resistance in patients with liver cirrhosis, leading to the development of frank diabetes, characterized by fasting hyperglycemia and glycosuria.