Both ethnicity and familial diabetes (FHD) confer risk for type 2 diabetes [diabetes mellitus (DM)], but their relative influence has not been established. To analyze the separate impact of ethnicity, Mexican-American vs. Caucasian, and FHD on the physiological determinants of glucose tolerance, we measured insulin sensitivity of glucose uptake (IS(GU)) (by the clamp technique), endogenous glucose production (by 3-[(3)H]glucose infusion), and insulin secretory response (to oral glucose) in 172 Mexican-Americans and 60 Caucasians with normal glucose tolerance (NGT) or DM. IS(GU) was markedly reduced in diabetics vs. NGT (3.9 +/- 0.2 vs. 8.4 +/- 0.5 ml.min(-1).kg(ffm)(-1), P < 0.0001), and lower in Mexican-Americans than in Caucasians (5.3 +/- 0.3 vs. 7.3 +/- 0.7 ml.min(-1).kg(ffm)(-1), P < 0.003; ffm, fat-free mass). In a multivariate analysis including both ethnicity and FHD (and adjusting for body mass index, age, and diabetes), ethnicity was still a significant (P = 0.02) independent correlate of IS(GU). Insulin resistance of glucose production was increased in diabetics (14 +/- 1 mmol.min(-1).[ micro U/ml], P < 0.0001 vs. 9 +/- 1 of NGT), whereas the 30' insulin/glucose ratio was decreased (16 +/- 1 micro U/mg, P < 0.0001 vs. 60 +/- 5). In multivariate models, neither ethnicity nor FHD were significant independent correlates of glucose production and early insulin response. We conclude that the primary physiological target of the propensity to diabetes of Mexican-Americans is insulin resistance of glucose uptake.