To determine whether regulation of fasting endogenous glucose production (EGP) and glucose disappearance (R-d) are both abnormal in people with type 2 diabetes, EGP and R-d were measured in 7 "severe" (SD), 9 "mild" (MD), and 12 nondiabetic (ND) subjects (12.7+/-0.6 vs. 8.1+/-0.4 vs. 5.1+/-0.4 mmol/l) after an overnight fast and during a hyperglycemic pancreatic clamp. Fasting insulin was higher in both the SD and MD than ND subjects, whereas fasting glucagon only was increased (P<0.05) in SD. Fasting EGP, glycogenolysis, gluconeogenesis, and R-d all were increased (P<0.05) in SD but did not differ in MD or ND. On the other hand, when glucose (similar to11 mmol/l), insulin (similar to72 pmol/l), and glucagon (similar to140 pg/ml) concentrations were raised to values similar to those observed in the severe diabetic subjects, EGP was higher (P<0.001) and R-d lower (P<0.01) in both SD and MD than in ND. The higher EGP in the SD and MD than ND during the clamp was the result of increased (P<0.05) rates of glycogenolysis (4.2 +/- 1.7 vs. 3.5 +/- 1.0 vs. 0.0 +/- 0.8 mu mol.kg(-1).min(-1)), since gluconeogenesis did not differ among groups. We conclude that neither glucose production nor disappearance is appropriate for the prevailing glucose and insulin concentrations in people with mild or severe diabetes. Both increased rates of gluconeogenesis (likely because of higher glucagon concentrations) and lack of suppression of glycogenolysis contribute to excessive glucose production in type 2 diabetics.