The molecular basis of type 2 diabetes predisposition at most established susceptibility loci remains poorly understood. KCNQ1 maps within the 11p15.5 imprinted domain, a region with an established role in congenital growth phenotypes. Variants intronic to KCNQ1 influence diabetes susceptibility when maternally inherited. By use of quantitative PCR and pyrosequencing of human adult islet and fetal pancreas samples, we investigated the imprinting status of regional transcripts and aimed to determine whether type 2 diabetes risk alleles influence regional DNA methylation and gene expression. The results demonstrate that gene expression patterns differ by developmental stage. CDKN1C showed monoallelic expression in both adult and fetal tissue, whereas PHLDA2, SLC22A18, and SLC22A18AS were biallelically expressed in both tissues. Temporal changes in imprinting were observed for KCNQ1 and KCNQ1OT1, with monoallelic expression in fetal tissues and biallelic expression in adult samples. Genotype at the type 2 diabetes risk variant rs2237895 influenced methylation levels of regulatory sequence in fetal pancreas but without demonstrable effects on gene expression. We demonstrate that CDKN1C, KCNQ1, and KCNQ1OT1 are most likely to mediate diabetes susceptibility at the KCNQ1 locus and identify temporal differences in imprinting status and methylation effects, suggesting that diabetes risk effects may be mediated in early development.