Bile acids promote bile formation and facilitate dietary lipid absorption. Animal and human studies showing disturbed bile acid metabolism in diabetes mellitus suggest a link between bile acids and glucose control. Bile acids are activating ligands of the farnesoid X receptor (FXR), a nuclear receptor with an established role in bile acid and lipid metabolism. Evidence suggests a role for FXR also in maintenance of glucose homeostasis. Animal and human studies employing bile acid sequestrants (bile acid binding agents), which interrupt the enterohepatic circulation of bile acids and effectively reduce plasma cholesterol, support a link between bile acid and glucose metabolism. In lipid-lowering trials, bile acid sequestrants, such as colesevelam hydrochloride, colestyramine (cholestyramine) and colestilan (colestimide), have also been shown to lower plasma glucose and glycosylated haemoglobin levels, suggesting the utility of these agents as a potential therapy for type 2 diabetes. In this article, we review the relationship between bile acid metabolism and glucose homeostasis, and present data demonstrating the utility of bile acid sequestrants in the management of diabetes.