Hyperglycaemia in Type 2 diabetes is a consequence of pancreatic dysfunction with a relative reduction in insulin secretion which progressively declines with disease duration. Type 2 diabetes is also associated with hyperglucagonaemia and it has been suggested this is critical for the development of hyperglycaemia in the setting of insulin deficiency. Apart from the thiazolidinediones and early insulin use obtaining tight glycaemic control, there is little evidence at this stage that current agents used to treat diabetes can prevent this ongoing pancreatic dysfunction. Agents that act on the incretin system lead to suppression of glucagon and hence may be of benefit even in the late stages of Type 2 diabetes. Specific compounds have been developed to inhibit the glucagon receptor but early trials have raised some safety concerns with elevated liver function tests, LDL cholesterol and islet-cell hyperplasia. Insulin remains a practical option for the management of late-stage Type 2 diabetes where there is pancreatic failure.