We tested the generally accepted concept that increased gluconeogenesis (GNG) and endogenous glucose production (EGP) are the main reasons for postabsorptive hyperglycemia in patients with type 2 diabetes mellitus (T2DM). GNG was measured with the ²H₂O method by use of both the C5-to-C2 ratio (C5/C2, with gas chromatography-mass spectrometry) and the C5-to-²H₂O ratio (C5/²H₂O, with isotope ratio mass spectrometry), and EGP was measured with 3-[³H]glucose in 27 patients with T2DM [13 with fasting plasma glucose (FPG) >10 mM and 14 with FPG <10 mM] and in 7 weight- and age-matched nondiabetic controls. The results showed 1) that GNG could be determined accurately with ²H₂O by using either C5/C2 or C5/²H₂O; 2) that whereas after an overnight fast of 16 h, GNG was higher in the entire group of patients with T2DM than in controls (6.4 vs. 5.0 μmol · kg⁻¹ · min⁻¹ or 60.4 vs. 51.4% of EGP, P < 0.02), GNG was within normal limits (less than the mean ± 2 SD of controls or <65.3%) in 11/14 (79%) patients with mild to moderate hyperglycemia (FPG <10 mM) and in 5/13 (38%) of patients with severe hyperglycemia (FPG 10–20 mM); 3) that elevated GNG in T2DM was associated with a 43% decrease in prehepatic insulin secretion, i.e., with hepatic insulin deficiency; and 4) that FPG correlated significantly with glucose clearance (insulin resistance) (r = 0.70) and with GNG (r = 0.50) or EGP (r = 0.45). We conclude 1) that peripheral insulin resistance is at least as important as GNG (and EGP) as a cause of postabsorptive hyperglycemia in T2DM and 2) that GNG and EGP in T2DM are increased under conditions of significant hepatic insulin deficiency and thus probably represent a late event in the course of T2DM.