The transcription factor insulin promoter factor-1 (IPF-1) plays a central role in both the development of the pancreas and the regulation of insulin gene expression in the mature pancreatic β cell. A dominant-negative frameshift mutation in the IPF-l gene was identified in a single family and shown to cause pancreatic agenesis when homozygous and maturity-onset diabetes of the young (MODY) when heterozygous. We studied the role of IPF-1 in Caucasian diabetic and nondiabetic subjects from the United Kingdom. Three novel IPF-1 missense mutations (C18R, D76N, and R197H) were identified in patients with type 2 diabetes. Functional analyses of these mutations demonstrated decreased binding activity to the human insulin gene promoter and reduced activation of the insulin gene in response to hyperglycemia in the human β-cell line Nes2y. These mutations are present in 1% of the population and predisposed the subject to type 2 diabetes with a relative risk of 3.0. They were not highly penetrant MODY mutations, as there were nondiabetic mutation carriers 25–53 years of age. We conclude that mutations in the IPF-1 gene may predispose to type 2 diabetes and are a rare cause of MODY and pancreatic agenesis, with the phenotype depending upon the severity of the mutation.