OBJECTIVE-To evaluate the effects of two bariatric procedures versus intensive medical therapy (IMT) on β-cell function and body composition. RESEARCH DESIGN AND METHODS-This was a prospective, randomized, controlled trial of 60 subjects with uncontrolled type 2 diabetes (HbA 1c 9.7±6 1%) and moderate obesity (BMI 36±6 2 kg/m 2 ) randomized to IMT alone, IMT plus Roux-en-Y gastric bypass, or IMT plus sleeve gastrectomy. Assessment of β-cell function (mixed-meal tolerance testing) and body composition was performed at baseline and 12 and 24 months. RESULTS-Glycemic control improved in all three groups at 24 months (N 5 54), with a mean HbA 1c of 6.7±61.2% for gastric bypass, 7.1±60.8%for sleeve gastrectomy, and 8.4±62.3% for IMT (P<0.05 for each surgical group versus IMT). Reduction in body fat was similar for both surgery groups, with greater absolute reduction in truncal fat in gastric bypass versus sleeve gastrectomy (216 vs.210%; P50.04). Insulin sensitivity increased significantly frombaseline in gastric bypass (2.7-fold; P 5 0.004) and did not change in sleeve gastrectomy or IMT. β-Cell function (oral disposition index) increased 5.8-fold in gastric bypass from baseline, was markedly greater than IMT (P 5 0.001), and was not different between sleeve gastrectomy versus IMT (P 5 0.30). At 24 months, β-cell function inversely correlated with truncal fat and prandial free fatty acid levels. CONCLUSIONS-Bariatric surgery provides durable glycemic control compared with intensive medical therapy at 2 years. Despite similar weight loss as sleeve gastrectomy, gastric bypass uniquely restores pancreatic β-cell function and reduces truncal fat, thus reversing the core defects in diabetes.