Identification of individuals at high risk of developing type 2 diabetes is a prerequisite for prevention of the disease. We therefore studied risk factors predicting type 2 diabetes in the Botnia Study in western Finland. A total of 2,115 nondiabetic individuals were prospectively followed with repeated oral glucose tolerance tests. After a median follow-up of 6 years, 127 (6%) subjects developed diabetes. A family history of diabetes (hazard ratio [HR] 2.2, P = 0.008), BMI (HR for comparison of values below or above the median 2.1, P < 0.001), waist-to-height index (2.3, P < 0.001), insulin resistance (2.1, P = 0.0004), and β-cell function adjusted for insulin resistance (2.7, P < 0.0001) predicted diabetes. Marked deterioration in β-cell function with modest changes in insulin sensitivity was observed during the transition to diabetes. The combination of FPG ≥5.6 mmol/l, BMI ≥30 kg/m², and family history of diabetes was a strong predictor of diabetes (3.7, P < 0.0001). Of note, using FPG ≥6.1 mmol/l or 2-h glucose ≥7.8 mmol/l did not significantly improve prediction of type 2 diabetes. In conclusion, a marked deterioration in β-cell function precedes the onset of type 2 diabetes. These individuals can be identified early by knowledge of FPG, BMI, and family history of diabetes.