OBJECTIVE: We have examined the relationship between hepatic enzymes, the metabolic syndrome, insulin resistance, and type 2 diabetes and assessed the potential of hepatic enzyme measurements in determining diabetes risk. RESEARCH DESIGN AND METHODS: We conducted a prospective study of 3,500 nondiabetic men aged 60-79 years who were followed-up for a mean period of 5 years and in whom there were 100 incident type 2 diabetes cases. RESULTS: In cross-sectional analyses, alanine aminotransferase (ALT) and gamma-glutamyltransferase (GGT) were strongly associated with obesity, insulin resistance, and the metabolic syndrome. Prospectively, the risk of type 2 diabetes significantly increased with increasing levels of ALT and GGT even after adjustment for confounders including BMI (top versus bottom quarter ALT: relative risk 2.72 [95% CI 1.47-5.02]; GGT: 3.68 [1.68-8.04]). Additional adjustment for insulin resistance attenuated the effects, but the relationships with ALT and GGT remained significant (1.91 [1.01-3.60] and 2.69 [1.21-5.97], respectively). Further adjustment for inflammatory markers (C-reactive protein) made minor differences. Among high-risk subjects (obese men or those with the metabolic syndrome), elevated GGT and ALT enhanced the prediction of diabetes risk. CONCLUSIONS: Elevated levels of ALT and GGT within the normal range are independent predictors of type 2 diabetes in older men and are useful additional measures in identifying those at high risk of diabetes.