OBJECTIVE: To review advances in understanding the pathophysiologic basis of type 2 diabetes mellitus and the pharmacology and mechanism of action of dipeptidyl peptidase 4 (DPP-4) inhibition in correcting the underlying defects in glycemic control. DATA SOURCES: Articles were identified through MEDLINE for the period 1966 through November 2006. Abstracts and presentations from the American Diabetes Association Scientific Sessions and the European Association for the Study of Diabetes (2002-2006) were also searched for scientific reports on DPP-4 inhibitors. STUDY SELECTION AND DATA EXTRACTION: Abstracts, original clinical and preclinical research reports, and review articles published in the English language were identified for review. Literature discussing glucose regulation, incretin hormones, type 2 diabetes pathophysiology, and DPP-4 inhibition were evaluated and selected based on consideration of their support for the proof of concept, mechanistic and in vivo findings, and timeliness. DATA SYNTHESIS: The search for new and effective therapies for type 2 diabetes has led to the identification of a novel therapeutic target, the incretin hormones, which play a role in mediating glucose homeostasis via effects on glucagon and insulin secretion from pancreatic islet alpha- and beta-cells, respectively. The incretins' glucagon-like peptide-1 and glucose-dependent insulinotropic polypeptide are rapidly inactivated by the enzyme DPP-4. DPP-4 inhibitor agents act by blocking the active site of DPP-4, thereby preventing inactivation of and prolonging the duration of action of incretins, which in turn helps to correct the defective insulin and glucagon secretion that marks type 2 diabetes. Clinical studies to date indicate that DPP-4 inhibitors effectively stimulate insulin secretion, suppress glucagon release, and improve glucose control in patients with type 2 diabetes. These agents are well tolerated and have a low incidence of adverse effects. CONCLUSIONS: The DPP-4 inhibitors are novel agents for the treatment of type 2 diabetes. Compounds under development in this new class of oral antidiabetic drugs may be free of the limitations of current therapies.