ABSTRACT Background: A new inflammation mediator called secreted frizzled-related protein 4 (SFRP4), was recently found, the secretion of which is regulated by interleukin-1β. SFRP4 as a potential biomarker of early β-cell dysfunction can help to identify high-risk individuals who are going to develop diabetes in the future. It is highly expressed in β-cells of islets and its levels increase several years before diabetes diagnosis. Objectives: This study was conducted with an objective to estimate and correlate SFRP4 in pre-diabetes, type 2 diabetes, and non-diabetes persons, and evaluate the predictive risk assessment of SFRP4 as a novel biomarker. Materials and Methods: In this cross-sectional observational study, a total of 300 human participants were included among which 100 were prediabetic, 100 were diabetic, and 100 were age- and gender-matched control individuals from a community, all of whom were selected through a predesigned screening questionnaire and inclusion and exclusion criteria from January 2020 to January 2022 in Banke district, Nepal. Serum SFRP4 and IL-1β levels were determined by ELISA. Results: There was a statistically significant difference in body mass index (BMI), waist circumference (WC), systolic blood pressure (SBP), fasting insulin, fasting plasma glucose (FPG), two-hour post-load plasma glucose (2hPG), glycosylated hemoglobin (HbA1c), insulin resistance (HOMA-IR), Homeostasis model assessment of β cell function (HOMA-β%), high-sensitivity C-reactive protein (hs-CRP), total cholesterol (TC), triglyceride (TG), and low-density lipoprotein (LDL) between the three groups, with a progressive increase from the normal glucose tolerance (NGT) to impaired glucose tolerance (IGT) groups and with the highest value in the type 2 diabetes mellitus (T2DM) groups (P < 0.05). However, diastolic blood pressure (DBP) and IL-1β showed a significant difference between the NGT and T2DM groups (P < 0.001) and the NGT and IGT groups (P < 0.001). The median serum SFRP4 concentrations showed a significant difference among three groups (all P < 0.05) and were positively correlated with FPG, HbA1c, hs-CRP, and IL-1 β (P < 0.05). Conclusion: Our study presumes importance as we report increased SFRP4 levels in Asian Nepalis even at the stage of IGT. These findings propose that the increased serum SFRP4 may be a good biomarker of decline in β-cell function and insulin resistance.