We carried out a genome-wide association study of type-2 diabetes (T2D) in individuals of South Asian ancestry. Our discovery set included 5,561 individuals with T2D (cases) and 14,458 controls drawn from studies in London, Pakistan and Singapore. We identified 20 independent SNPs associated with T2D at P < 10−4 for testing in a replication sample of 13,170 cases and 25,398 controls, also all of South Asian ancestry. In the combined analysis, we identified common genetic variants at six loci (GRB14, ST6GAL1, VPS26A, HMG20A, AP3S2 and HNF4A) newly associated with T2D (P = 4.1 × 10−8 to P = 1.9 × 10−11). SNPs at GRB14 were also associated with insulin sensitivity (P = 5.0 × 10−4), and SNPs at ST6GAL1 and HNF4A were also associated with pancreatic beta-cell function (P = 0.02 and P = 0.001, respectively). Our findings provide additional insight into mechanisms underlying T2D and show the potential for new discovery from genetic association studies in South Asians, a population with increased susceptibility to T2D.