Abstract Epidemiological evidence supports an inverse relationship between adequate intake of dairy foods and susceptibility to type 2 diabetes (T2D). The biological mechanisms responsible for this association remain to be established. This review provides a current perspective on proposed mechanisms that may underlie these effects, and highlights how randomized clinical trials can be applied to investigate these relationships. Results from epidemiological studies generally support that consumption of milk and dairy products is associated with a lower incidence of T2D or improvements in glucose homeostasis indices, and studies of animal and cell models support a positive effect of dairy-rich diets or components on metabolic and inflammation factors relevant to T2D and insulin resistance. Emerging evidence indicates that dairy components that alter mitochondrial function (e.g., leucine actions on silent information regulator transcript 1 (SIRT1)-associated pathways), promote gut microbial population shifts, or influence inflammation and cardiovascular function (e.g., Ca-regulated peptides calcitonin gene-related peptide [CGRP] or calcitonin) should be considered as possible mechanistic factors linking dairy intake with lower risk for T2D. The possibility that dairy-derived trans-palmitoleic acid (tC16:1) has metabolic bioactivities has also been proposed. Pre-clinical and clinical studies focusing specifically on these parameters are needed to validate hypotheses regarding the potential roles of dairy products and their components on the determinants of glucose tolerance, particularly insulin sensitivity, pancreatic endocrine function, and inflammation in individuals at-risk for T2D development. Such experiments would complement epidemiological studies and add to the evidence base for recommendations regarding consumption of dairy products and their individual components.