Thiazolidinediones (TZDs) improve insulin sensitivity and maintain beta cell mass. This study examined whether this effect is attributable to improved mitochondrial function in the pancreas and the potential involvement of the pancreatic insulin-like growth factor (IGF) axis in mediating this effect. Female Wistar rats were given either saline (vehicle) or nicotine (1 mg kg⁻¹ day⁻¹) during pregnancy and lactation. Following weaning, nicotine-exposed offspring were randomized to receive either vehicle or rosiglitazone (3 mg kg⁻¹ day⁻¹) until 26 weeks of age when serum and pancreas tissue were collected. The effect of rosiglitazone on nicotine-induced mitochondrial dysfunction was also examined in vitro. Fetal and neonatal nicotine exposure resulted in structural and functional mitochondrial deficits relative to saline controls. The nicotine-induced mitochondrial defects were attenuated by postnatal rosiglitazone administration. A similar effect was observed in vitro; nicotine (25 ng/ml) inhibited beta cell mitochondrial function and co-treatment with rosiglitazone (1 μM) restored enzyme activity to control levels. Fetal and neonatal nicotine exposure also altered key components of the adult pancreatic IGF axis, an effect that was not prevented by rosiglitazone treatment. Rosiglitazone treatment maintains mitochondrial structure and function in the pancreas of rats that are prone to diabetes, as well as mitochondrial function in beta cell culture. We propose that this may be an important part of the mechanism by which rosiglitazone improves beta cell mass and prevents diabetes in individuals with impaired glucose tolerance and/or impaired fasting glucose. The underlying mechanism through which rosiglitazone targets the mitochondria remains to be determined, but does not appear to involve the IGF axis.