Type 2 diabetes is characterized by peripheral insulin resistance and insufficient insulin release from pancreatic islet beta cells. However, the role and sequence of b cell dysfunction and mass loss for reduced insulin levels in type 2 diabetes pathogenesis are unclear. Here, we exploit freshly explanted pancreas specimens from metabolically phenotyped surgical patients using an in situ tissue slice technology. This approach allows assessment of beta cell volume and function within pancreas samples of metabolically stratified individuals. We show that, in tissue of pre-diabetic, impaired glucose-tolerant subjects, beta cell volume is unchanged, but function significantly deteriorates, exhibiting increased basal release and loss of first-phase insulin secretion. In individuals with type 2 diabetes, function within the sustained beta cell volume further declines. These results indicate that dysfunction of persisting beta cells is a key factor in the early development and progression of type 2 diabetes, representing a major target for diabetes prevention and therapy.