Although steroids can induce insulin resistance, it is not known whether additional defects in insulin secretion are necessary for the development of diabetes. To address this question, we measured insulin sensitivity (euglycemic insulin clamp in combination with indirect calorimetry and infusion of tritiated glucose) and insulin secretion (hyperglycemic clamp) in three groups of subjects: (1) 10 kidney transplant patients with normal oral glucose tolerance, (2) 14 patients who developed diabetes after kidney transplantation, and (3) 10 healthy controls. Glucose utilization, primarily storage of glucose as glycogen, was reduced by 34% in kidney transplant patients with normal glucose tolerance when compared with healthy control subjects (18.2 +/- 2.9 vs. 27.5 +/- 2.7 microM/L; P less than 0.05). Insulin secretion was normal in relation to the degree of insulin resistance in transplanted non-diabetic patients, thus maintaining a normal oral glucose tolerance. Development of transplantation diabetes was associated with only minor further deterioration of glucose storage (14.7 +/- 2.7 microM/L; P less than 0.001 vs. control subjects), whereas first-phase, second-phase, and glucagon-stimulated insulin secretion measured during hyperglycemic clamping (incremental area under the insulin curve 287 +/- 120, 1275 +/- 419, and 3515 +/- 922 pM) became impaired as compared with nondiabetic kidney transplant patients (769 +/- 216, 3084 +/- 545, and 6293 +/- 533 pM; P less than 0.05). We conclude that both insulin resistance and insulin deficiency are necessary for the development of diabetes in kidney transplant patients.