OBJECTIVE: To determine whether overweight Latino children with impaired fasting glucose (IFG) (> or = 100 mg/dl) have increased insulin resistance or decreased beta-cell function compared with those with normal fasting glucose (NFG). RESEARCH DESIGN AND METHODS: We studied 207 healthy overweight Latino children, aged 8-13 years, with a family history of type 2 diabetes. Fasting and 2-h glucose and insulin were assessed by oral glucose tolerance test. Insulin sensitivity (S(i)), the acute insulin response to glucose (AIRg), and the disposition index (DI; an index of beta-cell function) were determined using the insulin-modified intravenous glucose tolerance test and minimal modeling. Body composition was determined by dual-energy X-ray absorptiometry. RESULTS: There were no differences in body composition between NFG (n = 182) and IFG (n = 25) children. Compared with children with NFG, children with IFG had higher fasting and 2-h glucose values and higher fasting insulin. After adjusting for covariates, children with IFG had no difference in S(i) but 15% lower DI than NFG children (2,224 +/- 210 vs. 2,613 +/- 76, P < 0.05). Multivariate linear regression showed that AIRg and DI, but not S(i), were significant predictors of fasting blood glucose. CONCLUSIONS: In overweight Latino adolescents with a family history of type 2 diabetes, IFG is associated with impaired beta-cell function and therefore may identify children likely to be at risk for progression to type 2 diabetes. The actual risk of progression of IFG to type 2 diabetes remains to be determined by prospective longitudinal studies.