Second generation antipsychotics (SGAs) are widely prescribed to treat various disorders, most notably schizophrenia and bipolar disorder; however, SGAs can cause abnormal glucose metabolism that can lead to insulin-resistance and type 2 diabetes mellitus side-effects by largely unknown mechanisms. This review explores the potential candidature of the acetylcholine (ACh) muscarinic M3 receptor (M3R) as a prime mechanistic and possible therapeutic target of interest in SGA-induced insulin dysregulation. Studies have identified that SGA binding affinity to the M3R is a predictor of diabetes risk; indeed, olanzapine and clozapine, SGAs with the highest clinical incidence of diabetes side-effects, are potent M3R antagonists. Pancreatic M3Rs regulate the glucose-stimulated cholinergic pathway of insulin secretion; their activation on β-cells stimulates insulin secretion, while M3R blockade decreases insulin secretion. Genetic modification of M3Rs causes robust alterations in insulin levels and glucose tolerance in mice. Olanzapine alters M3R density in discrete nuclei of the hypothalamus and caudal brainstem, regions that regulate glucose homeostasis and insulin secretion through vagal innervation of the pancreas. Furthermore, studies have demonstrated a dynamic sensitivity of hypothalamic and brainstem M3Rs to altered glucometabolic status of the body. Therefore, the M3R is in a prime position to influence glucose homeostasis through direct effects on pancreatic β-cells and by potentially altering signalling in the hypothalamus and brainstem. SGA-induced insulin dysregulation may be partly due to blockade of central and peripheral M3Rs, causing an initial disruption to insulin secretion and glucose homeostasis that can progressively lead to insulin resistance and diabetes during chronic treatment.