The objective of the present study was to investigate the changes in glucose and insulin metabolism in nutritionally stunted children that can be involved in the appearance of chronic diseases in adulthood. For this purpose, sixty-one children were selected, thirty-five boys and twenty-six girls, residents of slums in São Paulo, Brazil. The children were classified according to the height-for-age as stunted (≤−1·5 Z-score; n 21) or non-stunted (>−1·5 Z-score; n 40). The glucose and insulin plasma levels were determined and, from these values, the indexes that evaluate the pancreatic β-cell function (homeostasis model assessment (HOMA-B)) and insulin sensitivity (HOMA-S) were assessed. Stunted children showed lower values of fasting insulin than those of the non-stunted group (boys: 29·7 (sd 14·9) v. 50·4 (sd 29·2) pmol/l, P=0·019; girls: 34·4 (sd 12·6) v. 62·3 (sd 28·7) pmol/l, P=0·016) but the glucose levels were similar (boys: 4·6 (sd 0·3) v. 4·5 (sd 0·3) mmol/l; girls: 4·2 (sd 0·3) v. 4·4 (sd 0·3) mmol/l). Stunted children showed lower HOMA-B values (boys: 83 (sd 22) % v. 115 (sd 36) %, P=0·011; girls: 107 (sd 23) % v. 144 (sd 46) %, P=0·045) and higher HOMA-S values (boys: 196 (sd 92) % v. 120 (sd 62) %, P=0·014; girls: 159 (sd 67) % v. 98 (sd 57) %, P=0·016). The results show a decreased activity of β-cell function and increased insulin sensitivity in stunted children. The decreased β-cell function of this group may strongly predict type 2 diabetes.