The role of dietary cholesterol in people with diabetes has been little studied. We investigated the effect of a hypoenergetic high-protein high-cholesterol (HPHchol) diet compared to a similar amount of animal protein (high-protein low-cholesterol, HPLchol) on plasma lipids, glycaemic control and cardiovascular risk markers in individuals with type 2 diabetes. A total of sixty-five participants with type 2 diabetes or impaired glucose tolerance (age 54·4 (sd 8·2) years; BMI 34·1 (sd 4·8) kg/m2; LDL-cholesterol (LDL-C) 2·67 (sd 0·10) mmol/l) were randomised to either HPHchol or HPLchol. Both hypoenergetic dietary interventions (6-7 MJ; 1·4-1·7 Mcal) and total carbohydrate:protein:fat ratio of 40:30:30 % were similar but differed in cholesterol content (HPHchol, 590 mg cholesterol; HPLchol, 213 mg cholesterol). HPHchol participants consumed two eggs per d, whereas HPHchol participants replaced the eggs with 100 g of lean animal protein. After 12 weeks, weight loss was 6·0 (sd 0·4) kg (P < 0·001). LDL-C and homocysteine remained unchanged. All the subjects reduced total cholesterol ( - 0·3 (sd 0·1) mmol/l, P < 0·001), TAG ( - 0·4 (sd 0·1) mmol/l, P < 0·001), non-HDL-cholesterol (HDL-C, - 0·4 (sd 0·1) mmol/l, P < 0·001), apo-B ( - 0·04 (sd 0·02) mmol/l, P < 0·01), HbA1c ( - 0·6 (sd 0·1) %, P < 0·001), fasting blood glucose ( - 0·5 (sd 0·2) mmol/l, P < 0·01), fasting insulin ( - 1·7 (sd 0·7) mIU/l, P < 0·01), systolic blood pressure ( - 7·6 (sd 1·7) mmHg, P < 0·001) and diastolic blood pressure ( - 4·6 (sd 1·0) mmHg; P < 0·001). Significance was not altered by diet, sex, medication or amount of weight loss. HDL-C increased on HPHchol (+0·02 (sd 0·02) mmol/l) and decreased on HPLchol ( - 0·07 (sd 0·03) mmol/l, P < 0·05). Plasma folate and lutein increased more on HPHchol (P < 0·05). These results suggest that a high-protein energy-restricted diet high in cholesterol from eggs improved glycaemic and lipid profiles, blood pressure and apo-B in individuals with type 2 diabetes.