The EarlyBird Project in Plymouth, which concluded this week, monitored 300 children for the disease over 12 years.
It recruited the healthy five-year-olds in 2000 and tested them twice a year by getting them to wear activity monitors, scanning their bones and taking blood samples.
Type 2 diabetes used to be considered a disease of middle and old age, but three of the youngsters who volunteered for the project have already developed the condition and researchers believe a further 55 are showing clinical signs of developing it.
Prof Terry Wilkin, director of the EarlyBird Diabetes Research Study, said: "We were aghast at the finding that 55 of these children have shown impaired fasting glucose, suggesting that today's children, contemporary children, are really at quite substantial risk."
The number of children developing the condition has rocketed in recent years, making it the fastest growing childhood disease. Left unchecked, one in five children born today will develop diabetes.
Georgina Mayhew, an EarlyBird volunteer, said: "Because my granddad has Type 2 diabetes I think that it is quite a big influence.
"If there's anything I could have done to help him possibly not get diabetes in the future then I'm going to do it. The data I'm providing will hopefully help other people."
The project found that the seeds of diabetes are sown very early in life, probably before children go to school.
It has also challenged some beliefs about exercise, suggesting that while it is vital for fitness, it does not prevent obesity, although being overweight does stop children from being active.
The study also suggests initiatives to get children playing sport will not make a difference unless they cut their calorie intake first.
While the project has officially finished, the collection of 4,000 blood samples from the EarlyBird children and their parents provide a unique archive.
Medical researchers in Britain and Switzerland are now using cutting edge science to unlock further secrets from the samples.
It is hoped that the knowledge gained will further improve the understanding of diabetes and help detect and prevent it in future.
Doctors carrying out a major study into Type 2 diabetes, the fastest growing childhood disease, say they are "aghast" at the number of children who have developed the condition.