Troglitazone is a new insulin-sensitizing agent used to treat type 2 diabetes mellitus. The mechanism by which troglitazone exerts its effect on systemic glucose metabolism is unknown. To determine the effects of 6 months of troglitazone monotherapy on glucose metabolism in patients with type 2 diabetes mellitus. Randomized, double-blind, placebo-controlled trial. Six general clinical research centers at university hospitals. 93 patients (mean age, 52 years) with type 2 diabetes mellitus (mean fasting plasma glucose level, 11.2 mmol/L) who were being treated with diet alone or who had discontinued oral antidiabetic medication therapy. Patients were randomly assigned to one of five treatment groups (100, 200, 400, or 600 mg of troglitazone daily or placebo) and had metabolic assessment before and after 6 months of treatment. Plasma glucose and insulin profiles during a meal tolerance test; basal hepatic glucose production and insulin-stimulated glucose disposal rate during a hyperinsulinemic-euglycemic clamp procedure. Troglitazone at 400 and 600 mg/d decreased both fasting (P < 0.001) and postprandial (P = 0.016) plasma glucose levels by approximately 20%. All four troglitazone dosages also decreased fasting (P = 0.012) and postprandial (P < 0.001) triglyceride levels; 600 mg of the drug per day decreased fasting free fatty acid levels (P = 0.018). Plasma insulin levels decreased in the 200-, 400-, and 600-mg/d groups (P < 0.001), and C-peptide levels decreased in all five study groups (P < 0.001). Basal hepatic glucose production was suppressed in the 600-mg/d group compared with the placebo group (P = 0.02). Troglitazone at 400 and 600 mg/d increased glucose disposal rate by approximately 45% above pretreatment levels (P = 0.003). Stepwise regression analysis showed that troglitazone therapy was the strongest predictor of a decrease in fasting (P < 0.001) or postprandial (P = 0.01) glucose levels. Fasting C-peptide level was the next strongest predictor (higher C-peptide level equaled greater glucose-lowering effect). Troglitazone monotherapy decreased fasting and postprandial glucose levels in patients with type 2 diabetes, primarily by augmenting insulin-mediated glucose disposal.