Aims/hypothesis Our aim was to compare the contributions of impaired beta cell function (IBF) and insulin resistance with the development of type 2 diabetes in a Japanese community. Methods A total of 2094 residents aged 40–79 years without diabetes underwent a health examination including a 75 g OGTT in 2007. Participants were divided into four groups according to the presence or absence of IBF (insulinogenic index/HOMA-IR ≤28.5) and insulin resistance (HOMA-IR ≥1.61) and were followed up for 7 years (2007–2014). Cox’s proportional hazards model was used to estimate HRs and 95% CIs for type 2 diabetes. The population attributable fractions (PAFs) due to IBF, insulin resistance, and their combination were calculated. Results At baseline, the prevalence of isolated IBF, isolated insulin resistance, and both IBF and insulin resistance were 5.4%, 24.1% and 9.5%, respectively. During the follow-up period, 272 participants developed type 2 diabetes. The multivariable-adjusted HRs (95% CI) and PAFs (95% CI) for type 2 diabetes were 6.3 (4.3, 9.2) and 13.3% (8.7, 17.7) in the participants with isolated IBF, 1.9 (1.3, 2.7) and 10.5% (4.0, 16.6) in those with isolated insulin resistance, and 8.0 (5.7, 11.4) and 29.3% (23.0, 35.1) in those with both IBF and insulin resistance, respectively, compared with the participants without either. Conclusions/interpretation The present study suggests that the combination of IBF and insulin resistance makes the main contribution to the development of type 2 diabetes in Japanese communities. Graphical abstract