Introduction: Women with polycystic ovary syndrome (PCOS) are at increased risk of developing glucose intolerance and diabetes attributed to increased insulin resistance (IR). However, it is not clear whether β-cell dysfunction has a central role in pathogenesis. The distinction has important implications for the prevention of type 2 diabetes in PCOS with interventions that ameliorate IR. This study aimed to find if IR differs among the various phenotypes of PCOS and perform a quantitative estimation of β-cell dysfunction versus IR in patients of PCOS participants. Materials and Methods: This case–control study was conducted for 1 year in the Endocrinology and Gynaecology outpatient departments at Gauhati Medical College. Fifty women newly diagnosed with PCOS, as per the Rotterdam criteria, were considered cases. Fifty, age- and body mass index-matched healthy females were taken as controls. Fasting and postprandial blood glucose, serum insulin, testosterone, and oral glucose tolerance test values were taken. Impaired fasting glucose, impaired glucose tolerance (IGT), and type 2 diabetes mellitus T2DM were diagnosed according to ADA 2011 criteria. IR and β-cell function were determined by “homeostasis model assessment (HOMA)”. Results: We observed an altered relationship between IR and insulin secretion, consistent with an intrinsic β-cell defect, wherein IR led to a decreased amount of compensatory insulin secretion in PCOS compared with normal women. The correlation coefficients relating HOMA%B to HOMA-IR were lower in PCOS, indicating less compensatory insulin secretion for a given increment in IR. Conclusion: PCOS patients are at increased risk of developing glucose intolerance and diabetes.