Recent studies suggest an inflammatory process, characterized by local cytokine/chemokine production and immune cell infiltration, regulates islet dysfunction and insulin resistance in type 2 diabetes. However, the factor initiating this inflammatory response is not known. Here, we characterized tissue inflammation in the type 2 diabetic GK rat with a focus on the pancreatic islet and investigated a role for IL-1. GK rat islets, previously characterized by increased macrophage infiltration, displayed increased expression of several inflammatory markers including IL-1beta. In the periphery, increased expression of IL-1beta was observed primarily in the liver. Specific blockade of IL-1 activity by the IL-1 receptor antagonist (IL-1Ra) reduced the release of inflammatory cytokines/chemokines from GK islets in vitro and from mouse islets exposed to metabolic stress. Islets from mice deficient in IL-1beta or MyD88 challenged with glucose and palmitate in vitro also produced significantly less IL-6 and chemokines. In vivo, treatment of GK rats with IL-1Ra decreased hyperglycemia, reduced the proinsulin/insulin ratio, and improved insulin sensitivity. In addition, islet-derived proinflammatory cytokines/chemokines (IL-1beta, IL-6, TNFalpha, KC, MCP-1, and MIP-1alpha) and islet CD68(+), MHC II(+), and CD53(+) immune cell infiltration were reduced by IL-1Ra treatment. Treated GK rats also exhibited fewer markers of inflammation in the liver. We conclude that elevated islet IL-1beta activity in the GK rat promotes cytokine and chemokine expression, leading to the recruitment of innate immune cells. Rather than being directly cytotoxic, IL-1beta may drive tissue inflammation that impacts on both beta cell functional mass and insulin sensitivity in type 2 diabetes.