Type 2 diabetes is known to be associated with a small body size at birth. Body size at birth is an indicator of the intrauterine environment. There is also a well-established association between the peroxisome proliferator-activated receptor (PPAR)-gamma2 gene and type 2 diabetes. We therefore assessed whether the effects of the Pro12Ala polymorphism of the PPAR-gamma2 gene on insulin sensitivity and insulin concentrations in adult life are modified by size at birth. We found that the effects of the Pro12Pro and Pro12Ala polymorphisms of the PPAR-gamma2 gene in elderly people depended on their body size at birth. The well-known association between small body size at birth and insulin resistance was seen only in individuals with the high-risk Pro12Pro allele. In those who had low birth weight, the Pro12Pro polymorphism of the PPAR-gamma2 gene was associated with increased insulin resistance (P < 0.002) and elevated insulin concentrations (P < 0.003). These interactions between the effects of the Pro12Ala polymorphisms of the PPAR-gamma2 gene on adult traits and the effects of birth weight link two previously unknown associations together within the context of type 2 diabetes. We suggest that these findings reflect gene-environment interaction.