Pharmacometric modelling is widely used in many aspects related to type 2 diabetes mellitus (T2DM), for instance in the anti-diabetes drug development, and in quantifying the disease progression of T2DM. The aim of this thesis were to improve the design of early phase anti-diabetes drug development studies with the focus on the power to identify mechanism of drug action (MoA), and to characterize and quantify the progression from prediabetes to overt diabetes, both the natural progression and the progression with diet and exercise interventions, using pharmacometrics modelling. The appropriateness of a study design depends on the MoAs of the anti-hyperglycaemic drug. Depending on if the focus is power to identify drug effect or accuracy and precision of drug effect, the best design will be different. Using insulin measurements on top of glucose has increase the power to identify a correct drug effect, distinguish a correct MoA from the incorrect, and to identify a secondary MoA in most cases. The accuracy and precision of drug parameter estimates, however, was not affected by insulin. A natural diabetes disease progression model was successfully added in a previously developed model to describe parameter changes of glucose and insulin regulation among impaired glucose tolerance (IGT) subjects, with the quantification of the lifestyle intervention. In this model, the assessment of multiple short-term provocations was combined to predict the long-term disease progression, and offers apart from the assessment of the onset of T2DM also the framework for how to perform similar analysis. Another previously published model was further developed to characterize the weight change in driving the changes in glucose homeostasis in subjects with IGT. This model includes the complex relationship between dropout from study and weight and glucose changes. This thesis has provided a first written guidance in designing a study for pharmacometrics analysis when characterizing drug effects, for early phase anti-diabetes drug development. The characterisation of the progression from prediabetes to overt diabetes using pharmacometrics modelling was successfully performed. Both the natural progression and the progression with diet and exercise interventions were quantified in this thesis.