Excess O-glycosylation of proteins by O-linked beta-N-acetylglucosamine (O-GlcNAc) may be involved in the pathogenesis of type 2 diabetes. The enzyme O-GlcNAc-selective N-acetyl-beta-d glucosaminidase (O-GlcNAcase) encoded by MGEA5 on 10q24.1-q24.3 reverses this modification by catalyzing the removal of O-GlcNAc. We have previously reported the linkage of type 2 diabetes and age at diabetes onset to an overlapping region on chromosome 10q in the San Antonio Family Diabetes Study (SAFADS). In this study, we investigated menangioma-expressed antigen-5 (MGEA5) as a positional candidate gene. Twenty-four single nucleotide polymorphisms (SNPs), identified by sequencing 44 SAFADS subjects, were genotyped in 436 individuals from 27 families whose data were used in the original linkage report. Association tests indicated significant association of a novel SNP with the traits diabetes (P = 0.0128, relative risk = 2.77) and age at diabetes onset (P = 0.0017). The associated SNP is located in intron 10, which contains an alternate stop codon and may lead to decreased expression of the 130-kDa isoform, the isoform predicted to contain the O-GlcNAcase activity. We investigated whether this variant was responsible for the original linkage signal. The variance attributed to this SNP accounted for approximately 25% of the logarithm of odds. These results suggest that this variant within the MGEA5 gene may increase diabetes risk in Mexican Americans.