Obesity has reached epidemic proportions in many countries around the world. Because of the close relationship between obesity and type 2 diabetes, an epidemic of diabetes is close behind the obesity epidemic. Preventing and treating obesity is becoming an increasing priority. In the United States, over 60% of the adult population is overweight or obese and thus at increased risk of developing diabetes and cardiovascular disease. While the aetiology of obesity and diabetes is complex, diet clearly plays an important role both in the development and management of these diseases. There is interest in functional foods that could help in prevention and/or management of obesity and type 2 diabetes. This could involve food products that help management of 'hunger' or that increase 'satiety'. It could also involve foods that contribute to more inefficient use of ingested energy (i.e. foods that stimulate energy expenditure more than would be expected from their energy content). As the concept of insulin sensitivity becomes generally more accepted by health care professionals and the public, foods may be targeted towards maximizing insulin sensitivity and towards 'prevention' of diabetes. In addition to foods that impact upon body weight, these may include foods that affect the glucose and/or insulin levels that are seen either following the ingestion of food or later in the day. The present paper reviews the complex aetiology of obesity and diabetes and considers a potential role for functional foods in prevention and treatment of obesity and diabetes.