The islet in type 2 diabetes mellitus (T2DM) is characterized by a deficit in β cells and islet amyloid derived from islet amyloid polypeptide (IAPP), a protein co-expressed with insulin by β cells. It is increasingly appreciated that the toxic form of amyloidogenic proteins is not amyloid but smaller membrane-permeant oligomers. Using an antibody specific for toxic oligomers and cryo-immunogold labeling in human IAPP transgenic mice, human insulinoma and pancreas from humans with and without T2DM, we sought to establish the abundance and sites of formation of IAPP toxic oligomers. We conclude that IAPP toxic oligomers are formed intracellularly within the secretory pathway in T2DM. Most striking, IAPP toxic oligomers appear to disrupt membranes of the secretory pathway, and then when adjacent to mitochondria, disrupt mitochondrial membranes. Toxic oligomer-induced secretory pathway and mitochondrial membrane disruption is a novel mechanism to account for cellular dysfunction and apoptosis in T2DM.