Intrauterine growth retardation (IUGR) has been linked to later development of type 2 diabetes in adulthood. Human studies indicate that individuals who were growth retarded at birth have impaired insulin secretion and insulin resistance. Multiple animal models of IUGR demonstrate impaired beta-cell function and development. We have developed a model of IUGR in the rat that leads to diabetes in adulthood with the salient features of most forms of type 2 diabetes in the human: progressive defects in insulin secretion and insulin action prior to the onset of overt hyperglycemia. Decreased beta-cell proliferation leads to a progressive decline in beta-cell mass. Using this model, we have tested the hypothesis that uteroplacental insufficiency disrupts the function of the electron transport chain in the fetal beta-cell and leads to a debilitating cascade of events: increased production of reactive oxygen species, which in turn damage mitochondrial (mt) mtDNA and causes further production of reactive oxygen species (ROS). The net result is progressive loss of beta-cell function and eventual development of type 2 diabetes in the adult. Studies in the IUGR rat also demonstrate that an abnormal intrauterine environment induces epigenetic modifications of key genes regulating beta-cell development; experiments directly link chromatin remodeling with suppression of transcription. Future research will be directed at elucidating the mechanisms underlying epigenetic modifications in offspring.