Hypoglycaemia remains the most common metabolic adverse effect of insulin and sulfonylurea therapy in diabetes. Repeated exposure to hypoglycaemia leads to a change in the symptom complex that characterises hypoglycaemia, culminating in a clinical phenomenon referred to as impaired awareness of hypoglycaemia (IAH). IAH effects approximately 20–25% of people with type 1 diabetes and increases the risk of severe hypoglycaemia. This review focuses on the mechanisms that are responsible for the much higher frequency of hypoglycaemia in people with diabetes compared with those without, and subsequently how repeated exposure to hypoglycaemia leads to the development of IAH. The mechanisms that result in IAH development are incompletely understood and likely to reflect changes in multiple aspects of the counterregulatory response to hypoglycaemia, from adaptations within glucose and non-glucose-sensing cells to changes in the integrative networks that govern glucose homeostasis. Finally, we propose that the general process that incorporates many of these changes and results in IAH following recurrent hypoglycaemia is a form of adaptive memory called ‘habituation’.