Mutations in PAX4, a transcription factor involved in the beta-cell differentiation, could predispose to the development of type 2 diabetes mellitus. To clarify the role of PAX4 Arg121Trp mutation on the development of type 2 diabetes mellitus, we try to determine the clinical phenotype in diabetic subjects with this mutation. Study subjects consisted of 793 type 2 diabetic patients and 318 control subjects. Genotyping for Arg121Trp polymorphism was performed by Invader assay. Clinical phenotype was determined in diabetic subjects including 20 Trp121 carriers and 142 wild-type subjects using a combination of 2-compartment model of C-peptide kinetics and minimal model analysis during intravenous glucose tolerance test. We detected 3 Trp/Trp, 51 Arg/Trp, and 739 Arg/Arg in diabetic subjects, and 16 Arg/Trp and 302 Arg/Arg in control subjects. The frequency of Trp121 allele was 3.59% and 2.51% in diabetic and control groups, respectively (P = .19). Rate of insulin users was higher in Trp121 carriers compared with the wild-type group (42.5% vs 25.0%, P = .0046). First-phase C-peptide secretion was significantly decreased in the diabetic subjects with Trp121 allele compared with the patients with wild type (P = .0048), whereas there were no significant differences in insulin sensitivity and glucose effectiveness between the groups. Arg121Trp mutation in PAX4 gene could be associated with beta-cell dysfunction in Japanese subjects with type 2 diabetes mellitus.