Deposition of human amylin or islet amyloid polypeptide (hIAPP) within the beta-cells of the pancreatic islet of Langerhans is implicated in the etiology of type 2 diabetes mellitus (T2Dm). Accumulating evidences suggest that increased body iron stores, iron overload, and, in particular, higher heme-iron intake is significantly associated with higher risk of Type 2 diabetes mellitus (T2Dm) (PloS One 2012, 7, e41641). Some key pathological features of T2Dm, like iron dyshomeostasis, iron accumulation, mitochondria] dysfunction, and oxidative stress are very similar to the cytopathologies of Alzheimer's disease, which have been invoked to be due to heme complexation with amyloid beta peptides. The similar etiology and pathogenic features in both Alzheimer's disease (AD) and T2Dm indicate a common underlying mechanism, with heme playing an important role. In this study we show that hIAPP can bind heme. His 18 residue of hIAPP binds heme under physiological conditions and results in an axial high-spin active site with a trans-axial water derived ligand. Arg11 is a key residue that is also essential for heme binding. Heme(Fe2+)-hIAPP complexes are prone to produce partially reduced oxygen species (PROS). The His 18 residue identified in this study is absent in rats which do not show T2Dm, implicating the significance of this residue as well as heme in the pathology of T2Dm.