Mitochondria are essential for intermediary metabolism as well as energy production in the cell. Their aerobic metabolism permits oxidation of glucose and fatty acids for the generation of ATP and other intermediates that are exchanged with the cytoplasm for various biosynthetic and secretory processes. In the pancreatic beta-cell, glucose carbons are quantitatively funneled to the mitochondria, where signals for the initiation and potentiation of insulin secretion are generated. After mitochondrial activation, the plasma membrane is depolarized with ensuing cytosolic calcium transients and exocytosis of insulin. Calcium also acts in a feed-forward manner on mitochondrial metabolism, which contributes to sustained second phase insulin secretion. Patients with mitochondrial diabetes and a corresponding mouse model display defective glucose-stimulated insulin secretion and reduced beta-cell mass, leading to overt diabetes. Normal mitochondrial activity appears to be equally important in the action of insulin on its target tissues. The development of insulin resistance may involve impairment of glucose oxidation after short exposure to increased levels of circulating free fatty acids. Insulin resistance in the elderly and in relatives of type 2 diabetic patients has also been associated with mitochondrial dysfunction. Both prevention and treatment of type 2 diabetes should focus on mitochondrial targets for the improvement of nutrient-stimulated insulin secretion and their utilization in peripheral tissues.