Islet amyloid polypeptide (IAPP) is responsible for amyloid deposition in type 2 diabetes and plays an important role in the loss of β-cell mass in the disease and in the failure of islet transplant, but the mechanism of islet amyloid formation is not understood. The incorrect processing of proIAPP to produce partially processed forms of the peptide has been proposed to play a role in the initiation of islet amyloid in vivo by promoting interactions with proteoglycans of the extracellular matrix. Insulin is a potent inhibitor of amyloid formation by IAPP in vitro in homogeneous solution, but its ability to inhibit IAPP in the presence of proteoglycans has not been tested, nor has its effect on amyloid formation by proIAPP processing intermediates been examined. Here we show that insulin is a much less effective amyloid inhibitor of both IAPP and proIAPP processing intermediates in vitro in the presence of model glycosaminoglycans, but does inhibit amyloid formation by proIAPP processing intermediates in homogeneous solution. This highlights another mechanism by which sulfated proteoglycans could enhance islet amyloid formation in vivo. Interactions with sulfated proteoglycans can directly promote amyloid formation, and can also significantly reduce the effectiveness of natural inhibitors.