Diabetes is now epidemic worldwide. Several hundred-million peoples are presently suffering from this disease with other secondary-disorders. Stress, hypertension, sedentary life-style, carbohydrate/lipid metabolic-disorders due to genetic or environmental factors attributes to type-1 and/or type-2 diabetes. Present investigation demonstrates that stress-induced protein dermcidin isoform-2 (DCN-2) which appears in the serum of diabetic-patients play a key-role in this disease pathogenesis/severity. DCN-2 suppresses insulin production-release from liver/pancreas. It also increases the insulin-resistance. Stress-induction at the onset/progression of this disease is noticed as the high-level of lipid peroxides/low-level of free-thiols in association with increase of inflammatory-markers c-reactive protein and TNF-α. DCN-2 induced decrease in the synthesis of glucose-activated nitric oxide synthase (GANOS) and lower production of NO in liver has been shown here where NO is demonstrated to lower the expression of glucose trabsporter-4 (GLUT-4) and its translocation on liver membrane surface. This finally impairs glucose transport to organs from the extracellular fluid. Low level of glucose uptake further decreases glucose-induced insulin synthesis. The central role of DCN-2 has been demonstrated in type-1/type-2 diabetic individuals, in rodent hepatocytes and pancreatic-cell, tissue-slices, in-vitro and in-vivo experimental model. It can be concluded that stress-induced decrease in insulin synthesis/function, glucose transport is an interactive consequence of oxidative threats and inflammatory events.