An individual's predisposition to Type I diabetes (T1D) is largely determined by complex interactions between several genetic loci and other, nonheritable factors. In T1D, the HLA locus has been known for decades to contribute 50% of the inherited risk. Outside the HLA are many proposed candidate loci with smaller effects, but only two confirmed candidate genes, the INS-VNTR and the CTLA-4 genes, which together do not contribute more than 15% of the risk. Because of the high frequency of the disease-associated DNA variants of these genes, understanding the biological mechanisms of such DNA variation in the context of T1D can have tremendous impact on the development of preventive therapeutics. However, establishing a causal relationship between common DNA variations and disease-predisposing functional effects is not trivial and remains difficult, as the effects are expected to be subtle. The variable-number tandem-repeat (VNTR) region upstream of the insulin gene is known to mediate expression in the thymus and pancreas, whereas various polymorphisms in the 5' and 3' regulatory regions of CTLA-4 are thought to alter gene expression and a coding A49G polymorphism exerts effects on post-translational processing. This review details the latest efforts in elucidating the functional mechanisms that explain the genetic association of the INS-VNTR and CTLA-4 genes with T1D.