In humans, type 2 diabetes progresses when beta-cells fail to compensate peripheral insulin resistance. Insulin receptor substrate (IRS) proteins mediate a variety of the metabolic and growth-promoting actions of insulin and IGF-1, and are important integrators of heterologous regulation. Systemic ablation of the Irs2 gene in mice causes β-cell dysfunction that prevents compensatory insulin secretion while insulin resistance progresses to life threatening hyperglycemia. Upregulation of IRS2 in pancreatic β-cell using rat insulin-2 promoter (Irs2RIP) promotes sufficient hyperinsulinemia to prevent diabetes. Targeted Irs2 deletion using CreRIP also causes beta-cell failure and hyperglycemia, but the mechanism is unclear because CreRIP drives deletion in beta-cells and hypothalamus—especially in the arcuate nucleus (ARC). AGRP neurons in the ARC play an important role in regulating energy homeostasis, but it is unknown whether IRS2 in the AGRP neurons might also affect beta-cell function. Here we show that disruption of Irs2 (but not Irs1) in AGRP neurons (Irs2f/fCreAgrp-mice) reduced islet mass by 45%. To test insulin secretory function, we subjected mice to hyperglycemic clamps. The glucose infusion rate to maintain steady-state hyperglycemia decreased significantly. Moreover, insulin secretion failed to respond to L-arginine treatment in aged Irs2f/fCreAgrp-mice. Moreover, Irs2f/fCreAgrp-mice displayed progressive deterioration of glucose homeostasis and a lack of beta -cell compensation during high fat diet. Overall, our results indicate that dysfunction of Irs2 in AGRP neurons might contribute to the pathophysiology of type 2 diabetes. Disclosure R. Tao: None. K.D. Copps: None. M.F. White: Advisory Panel; Self; Housey Pharmaceutical Research Laboratories. O. Stoehr: None. Funding National Institutes of Health (5R01DK098655-06)