Background: IUGR increases the risk of type 2 diabetes mellitus (T2DM) in later life, due to reduced insulin sensitivity and impaired adaptation of insulin secretion. In IUGR rats, development of T2DM can be prevented by neonatal administration of the GLP-1 analogue exendin-4. We therefore investigated effects of neonatal exendin-4 administration on insulin action and β-cell mass and function in the IUGR neonate in the sheep, a species with a more developed pancreas at birth. Methods: Twin IUGR lambs were injected s.c. daily with vehicle (IUGR+Veh, n = 8) or exendin-4 (1 nmol.kg-1, IUGR+Ex-4, n = 8), and singleton control lambs were injected with vehicle (CON, n = 7), from d 1 to 16 of age. Glucose-stimulated insulin secretion and insulin sensitivity were measured in vivo during treatment (d 12-14). Body composition, β-cell mass and in vitro insulin secretion of isolated pancreatic islets were measured at d 16. Principal Findings: IUGR+Veh did not alter in vivo insulin secretion or insulin sensitivity or β-cell mass, but increased glucose-stimulated insulin secretion in vitro. Exendin-4 treatment of the IUGR lamb impaired glucose tolerance in vivo, reflecting reduced insulin sensitivity, and normalised glucose-stimulated insulin secretion in vitro. Exendin-4 also reduced neonatal growth and visceral fat accumulation in IUGR lambs, known risk factors for later T2DM. Conclusions: Neonatal exendin-4 induces changes in IUGR lambs that might improve later insulin action. Whether these effects of exendin-4 lead to improved insulin action in adult life after IUGR in the sheep, as in the PR rat, requires further investigation.