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Type 2 diabetes represents a major and increasing contributor to morbidity and mortality worldwide. Of the world's population, 10% either have Type 2 diabetes, or will develop it during their lifetime. Realization that inherited factors play a leading role in determining individual susceptibility to this condition provides a framework for improved molecular understanding of disease pathogenesis through susceptibility gene discovery. In particular, identification and characterization of these susceptibility variants should lead to improved targeting of available preventative and therapeutic measures and increasingly ‘personalized’ therapy. This article surveys present knowledge about the genetic basis of Type 2 diabetes and discusses the current and future role of genetic diagnostics, with an emphasis on lessons learned from study of monogenic forms of the disease.