Type 2 diabetes frequently results from progressive failure of pancreatic β-cell function in the presence of chronic insulin resistance. We tested whether chronic amelioration of insulin resistance would preserve pancreatic β-cell function and delay or prevent the onset of type 2 diabetes in high-risk Hispanic women. Women with previous gestational diabetes were randomized to placebo (n = 133) or the insulin-sensitizing drug troglitazone (400 mg/day; n = 133) administered in double-blind fashion. Fasting plasma glucose was measured every 3 months, and oral glucose tolerance tests (OGTTs) were performed annually to detect diabetes. Intravenous glucose tolerance tests (IVGTTs) were performed at baseline and 3 months later to identify early metabolic changes associated with any protection from diabetes. Women who did not develop diabetes during the trial returned for OGTTs and IVGTTs 8 months after study medications were stopped. During a median follow-up of 30 months on blinded medication, average annual diabetes incidence rates in the 236 women who returned for at least one follow-up visit were 12.1 and 5.4% in women assigned to placebo and troglitazone, respectively (P < 0.01). Protection from diabetes in the troglitazone group 1) was closely related to the degree of reduction in endogenous insulin requirements 3 months after randomization, 2) persisted 8 months after study medications were stopped, and 3) was associated with preservation of β-cell compensation for insulin resistance. Treatment with troglitazone delayed or prevented the onset of type 2 diabetes in high-risk Hispanic women. The protective effect was associated with the preservation of pancreatic β-cell function and appeared to be mediated by a reduction in the secretory demands placed on β-cells by chronic insulin resistance.