Protein-coding genetic variants that strongly affect disease risk can yield relevant clues to disease pathogenesis. Here we report exome-sequencing analyses of 20,791 individuals with type 2 diabetes (T2D) and 24,440 non-diabetic control participants from 5 ancestries. We identify gene-level associations of rare variants (with minor allele frequencies of less than 0.5%) in 4 genes at exome-wide significance, including a series of more than 30 SLC30A8 alleles that conveys protection against T2D, and in 12 gene sets, including those corresponding to T2D drug targets (P = 6.1 × 10-3) and candidate genes from knockout mice (P = 5.2 × 10-3). Within our study, the strongest T2D gene-level signals for rare variants explain at most 25% of the heritability of the strongest common single-variant signals, and the gene-level effect sizes of the rare variants that we observed in established T2D drug targets will require 75,000-185,000 sequenced cases to achieve exome-wide significance. We propose a method to interpret these modest rare-variant associations and to incorporate these associations into future target or gene prioritization efforts.