Thiazolidinediones (TZDs) improve glycemic control and insulin sensitivity in patients with type 2 diabetes mellitus (T2DM). There is growing evidence from in vivo and in vitro studies that TZDs improve pancreatic -cell function. The aim of this study was to determine whether TZD-induced improvement in glycemic control is associated with improved -cell function. We studied 11 normal glucose tolerant and 53 T2DM subjects (age=53±2 y; BMI=29.4±0.8 kg/m²; fasting plasma glucose [FPG] =10.3±0.4 mM; HbA_1c=8.2±0.3 %). Diabetic patients were randomized to receive placebo or TZD for 4-months. Subjects received: (i) 2-hour OGTT with determination of plasma glucose, insulin and C-peptide concentrations; (ii) 2-step euglycemic insulin (40 and 160 mU·m^-2·min^-1) clamp with [3-³H]glucose. T2DM were then randomized to receive 4 months of pioglitazone (45 mg/d), rosiglitazone (8 mg/d), or placebo. Pioglitazone and rosiglitazone similarly improved FPG, mean PG during OGTT, HbA_1c, and insulin-mediated total body glucose disposal (Rd) and decreased mean plasma FFA during OGTT (all p < 0.01, ANOVA). The insulin secretion/insulin resistance (disposition) index (ISR[AUC]/glucose[AUC]÷IR) was significantly improved in all TZD-treated groups: +1.8±0.7 (PIO + drug naive diabetics), +0.7±0.3 (PIO + sulfonylurea-treated diabetics), and 0.7±0.2 (ROSI + sulfonylurea-withdrawn diabetics) versus -0.2±0.3 in the two placebo groups (p<0.01, all TZDs vs placebo, ANOVA). Iimproved insulin secretion correlated positively with increased body weight, fat mass and Rd, and inversely with decreased plasma glucose and FFA during the OGTT. In T2DM patients, TZD treatment leads to improved -cell function, which correlates strongly with improved glycemic control.