Compelling evidence has linked high exposure to inorganic arsenic (iAs) with increased risk of Type 2 diabetes (T2D). There is growing concern that low-to-moderate level of iAs exposure may contribute substantially to the epidemic of T2D. Nevertheless, the results of the current perspective studies are inconsistent, which could be attributable to varied susceptibility due for example to differences in intake of beneficial nutrients and existence of genetic variants of enzymes involved in iAs metabolism. We capitalized on China Health and Nutrition Survey with measured baseline (i.e. 2009) iAs exposure using toenail; Mg and Zn intake at baseline; fasting glucose and insulin at follow-up (i.e. 2015). Using multivariable adjusted regression models, we investigated the associations between baseline toenail arsenic and T2D incidence and indicators of glucose homeostasis at follow-up. We also examined potential effect modification by Mg and Zn intake at baseline on iAs-associated diabetes. In addition, we determined the gene-environment interaction using data from Mexico. We found a positive association between baseline iAs exposure and fasting glucose as well as odds of incident T2D. In addition, our findings suggest that instead of insulin resistance, pancreatic β-cell dysfunction is primarily involved in iAs-associated T2D. Moreover, though the association between baseline iAs exposure and pancreatic β-cell dysfunction at follow-up was stronger among participants with adequate Zn intake, the joint association between iAs exposure and dietary intake of Mg and Zn supports the beneficial effects of adequate Mg and Zn intake. In addition, our findings confirm that several genetic variants of arsenic methyl transferase (AS3MT) are in part responsible for the inter-individal differences in iAs metabolism, and roles of the variants may differ among populations with different levels of iAs exposure. Our study adds to the research on iAs and T2D by determining how, in the population with low-to-moderate iAs exposure, baseline iAs exposure relates to the development of T2D over 6 years. The proposed study also informs efforts to maximize the effectiveness of Mg and Zn intake to combat the diabetogenic effects of iAs and identifies genetically susceptible subgroups due to impaired iAs metabolism.