Transglutaminase 2 (TG2 or TGM2) is a multi‐functional enzyme which catalyzes transamidation reactions or acts as a G‐protein in intracellular signalling. Tgm2^‐/‐Mice lacking TG2 activity are glucose intolerant and show impairment of insulin secretion, suggesting an important physiological role for TG2 in the pancreatic β cell. We have previously described a TGM2 heterozygous missense mutation ((c.998A>G, p.N333S) in a 14 year‐old patient with insulin‐treated diabetes and in his diabetic father. The aim of this study was to further investigate the role of TG2 in early‐onset type 2 diabetes. We analysed the TGM2 gene in 205 patients with clinically defined Maturity Onset Diabetes of the Young (MODY) or early‐onset type 2 diabetes. We found two novel heterozygous mutations (c.989T>G, p.M330R; c.992T>A, p.I331N), which were not detected in 300 normoglycemic controls. All mutations were in residues which are located close to the catalytic site and impaired transamidating activity in vitro. Gene expression of TGM family genes and localization of TG2 in normal human pancreas indicated that TG2 is the only transglutaminase significantly expressed in human pancreatic islet cells. We conclude that reduced TG2 activity can contribute to disorders of glucose metabolism possibly via an impairment of insulin secretion. © 2007 Wiley‐Liss, Inc.