Objective: To compare insulin resistance and beta-cell function in nondiabetic, prediabetic, and diabetic subjects in a subset of obese Pakistani population. Materials and Methods: Two hundred and ten obese subjects underwent anthropometric measurements. After overnight fasting for 8 hours, 6 cc blood was drawn for fasting blood glucose level, fasting insulin level. Blood glucose samples were taken after drinking 75 gm glucose in 260 ml water. HOMA IR and HOMA BETA% were calculated by the formula. Subjects were divided into obese nondiabetic, obese prediabetic and obese diabetic according to WHO criteria. Results: Out of 210 obese subjects, 53 (25.2%) were males and 157 (74.8%) were females. The mean BMI was 32.39 +/- 5.21. Mean abdominal circumference was 102.78 +/- 10.16. There were 101(48%) obese nondiabetic, 51(24%) were found to be obese prediabetic, 58(28%) were found to be obese diabetic. Mean insulin resistance in obese nondiabetic subjects was 2.8 +/- 3.7, in prediabetic 8.5 +/- 12.3, in diabetic was 17.7 +/- 24.6. Mean HOMA beta was 245.3 +/- 267.4 in obese nondiabetic subjects, 290.5 +/- 298.4 in prediabetic, and 16.6 +/- 57 in diabetic. Conclusion: There was a significantly increased incidence of prediabetes and diabetes in obese subjects. Prediabetic and diabetic subjects were found to have marked insulin resistance. Beta-cell function was markedly reduced in diabetic subjects having a family history of diabetes, emphasizing the genetic predisposition to develop beta-cell exhaustion.