Pioglitazone, a thiazolidinedione, improves glycemic control primarily by increasing peripheral insulin sensitivity in patients with type 2 diabetes, whereas metformin, a biguanide, exerts its effect primarily by decreasing hepatic glucose output. In the first head-to-head, double-blind clinical trial comparing these two oral antihyperglycemic medications (OAMs), we studied the effect of 32-wk monotherapy on glycemic control and insulin sensitivity in 205 patients with recently diagnosed type 2 diabetes who were naive to OAM therapy. Subjects were randomized to either 30 mg pioglitazone or 850 mg metformin daily with titrations upward to 45 mg (77% of pioglitazone patients) and 2550 mg (73% of metformin patients), as indicated, to achieve fasting plasma glucose levels of less than 7.0 mmol/liter (126 mg/dl). Pioglitazone was comparable to metformin in improving glycemic control as measured by hemoglobin A1C and fasting plasma glucose. At endpoint, pioglitazone was significantly more effective than metformin in improving indicators of insulin sensitivity, as determined by reduction of fasting serum insulin (P = 0.003) and by analysis of homeostasis model assessment for insulin sensitivity (HOMA-S; P = 0.002). Both OAM therapies were well tolerated. Therefore, pioglitazone and metformin are equally efficacious in regard to glycemic control, but they exert significantly different effects on insulin sensitivity due to differing mechanisms of action. The more pronounced improvement in indicators of insulin sensitivity by pioglitazone, as compared with metformin monotherapy in patients recently diagnosed with type 2 diabetes who are OAM-naive, may be of interest for further clinical evaluation.