In models of type 2 diabetes the expression of beta-cell genes is altered, but these changes have not fully explained the impairment in beta-cell function. We hypothesized that changes in beta-cell phenotype and global alterations in both carbohydrate and lipid pathways are likely to contribute to secretory abnormalities. Therefore, expression of genes involved in carbohydrate and lipid metabolism were analyzed in islets 4 weeks after 85-95% partial pancreatectomy (Px) when beta-cells have impaired glucose-induced insulin secretion and ATP synthesis. Px rats after 1 week developed mild to severe hyperglycemia that was stable for the next 3 weeks, whereas neither plasma triglyceride, non-esterified fatty acid, or islet triglyceride levels were altered. Expression of peroxisome proliferator-activated receptors (PPARs), with several target genes, were reciprocally regulated; PPARalpha was markedly reduced even at low level hyperglycemia, whereas PPARgamma was progressively increased with increasing hyperglycemia. Uncoupling protein 2 (UCP-2) was increased as were other genes barely expressed in sham islets including lactate dehydrogenase-A (LDH-A), lactate (monocarboxylate) transporters, glucose-6-phosphatase, fructose-1,6-bisphosphatase, 12-lipoxygenase, and cyclooxygenase 2. On the other hand, the expression of beta-cell-associated genes, insulin, and GLUT2 were decreased. Treating Px rats with phlorizin normalized hyperglycemia without effecting plasma fatty acids and reversed the changes in gene expression implicating the importance of hyperglycemia per se in the loss of beta-cell phenotype. In addition, parallel changes were observed in beta-cell-enriched tissue dissected by laser capture microdissection from the central core of islets. In conclusion, chronic hyperglycemia leads to a critical loss of beta-cell differentiation with altered expression of genes involved in multiple metabolic pathways diversionary to normal beta-cell glucose metabolism. This global maladaptation in gene expression at the time of increased secretory demand may contribute to the beta-cell dysfunction found in diabetes.