Background: β-Cell dysfunction is a core defect in T2DM, and chronic, sustained hyperglycemia has been implicated in progressive β-cell failure, ie, glucotoxicity. The aim of the present study was to examine the effect of lowering the plasma glucose concentration with dapagliflozin, a glucosuric agent, on β-cell function in T2DM individuals. Research Design and Methods: Twenty-four subjects with T2DM received dapagliflozin (n = 16) or placebo (n = 8) for 2 weeks, and a 75-g oral glucose tolerance test (OGTT) and insulin clamp were performed before and after treatment. Plasma glucose, insulin, and C-peptide concentrations were measured during the OGTT. Results: Dapagliflozin significantly lowered both the fasting and 2-hour plasma glucose concentrations and the incremental area under the plasma glucose concentration curve (ΔG0-120) during OGTT by -33 ± 5 mg/dL, -73 ± 9 mg/dL, and -60 ± 12 mg/dL · min, respectively, compared to <13 ± 9, -33 ± 13, and -18 ± 9 reductions in placebo-treated subjects (both P < .01). The incremental area under the plasma C-peptide concentration curve tended to increase in dapagliflozin-treated subjects, whereas it did not change in placebo-treated subjects. Thus, ΔC-Pep0-120/ΔG0-120 increased significantly in dapagliflozin-treated subjects, whereas it did not change in placebo-treated subjects (0.019 ± 0.005 vs 0.002 ± 0.006; P < .01). Dapagliflozin significantly improved whole-body insulin sensitivity (insulin clamp). Thus, β-cell function, measured as ΔC-Pep0-120/ΔG0-120 ÷ insulin resistance, increased by 2-fold (P < .01) in dapagliflozin-treated vs placebo-treated subjects. Conclusion: Lowering the plasma glucose concentration with dapagliflozin markedly improves β-cell function, providing strong support in man for the glucotoxic effect of hyperglycemia on β-cell function.