From here
Try setting "Auto Generated Value" to false
I had the same problem as above, and as suggested in his follow up, deleting and recreating the datacontext fixed it. It's not pretty I know, but it indicates a bug in the dev environment, so there's probably not much else you can do.
I also had the same problem and deleting the table and reading it fixed it. I don't know about he solution not being pretty, it certainly did the trick and was very quick. Its ugly in that is a bug in Linq-to-Sql and Visual Studio 2008 (in my case, it could be a bug in other versions too), but its at least a livable bug.
As @Martin says, I've had the same problem though I didn't have to delete the whole diagram to fix it. All I had to do was force the diagram to regenerate the code. This is usually just a matter of changing something on the diagram and changing it back. In more severe cases, I've had to restart VS or even reboot to get the designer to regenerate the code.
I had this same issue, but wiping out the entity and importing it back didn't do the trick for me which caused be to have to dig even deeper. The real issue here is that under the SSDL content of your entity diagram there is a missing attribute (StoreGeneratedPattern="Identity") that should be on the ID property of your entity. Once you add this attribute you should be all set.
Example:
<EntityType Name="TABLENAME">
<Key>
<PropertyRef Name="ID" />
</Key>
<Property Name="ID" Type="int" Nullable="false" StoreGeneratedPattern="Identity" />
</EntityType>