The helix-loop-helix (HLH) protein NEUROD1 (also known as BETA2) functions as a regulatory switch for endocrine pancreatic development. In mice homozygous for a targeted disruption of Neurod, pancreatic islet morphogenesis is abnormal and overt diabetes develops due in part to inadequate expression of the insulin gene 1 (Ins2). NEUROD1, following its heterodimerization with the ubiquitous HLH protein E47, regulates insulin gene (INS) expression by binding to a critical E-box motif on the INS promoter 2. Here we describe two mutations in NEUROD1, which are associated with the development of type 2 diabetes in the heterozygous state. The first, a missense mutation at Arg 111 in the DNA-binding domain, abolishes E-box binding activity of NEUROD1. The second mutation gives rise to a truncated polypeptide lacking the carboxy-terminal trans-activation domain, a region that associates with the co-activators CBP and p300 (refs 3, 4). The clinical profile of patients with the truncated NEUROD1 polypeptide is more severe than that of patients with the Arg 111 mutation. Our findings suggest that deficient binding of NEUROD1 or binding of a transcriptionally inactive NEUROD1 polypeptide to target promoters in pancreatic islets leads to the development of type 2 diabetes in humans.