Incident diabetes and the worsening of diabetes have recently been linked to hepatic steatosis. Aim of our study was to determine whether oral hypoglycemic agent failure is associated with higher transaminase levels (valid measure of liver steatosis). We selected 200 patients, attenders (3 consecutive annual evaluations) in our clinic, with type 2 diabetes among which 100 with oral hypoglycemic agents failure and 100 who were still responsive to oral therapy. Failure to therapy was defined as glycated hemoglobin >7.5% despite maximal-dose oral therapy. We analyzed patient histories and laboratory data. Compared with oral-therapy-responsive patients, those with failure had a significantly higher level mostly of alanine aminotransferase at the time of therapy failure and 2 years before. They were more likely to have had symptoms of hyperglycemia at the time of diabetes diagnosis. Regression analysis indicated that each 5-unit increase in transaminase levels independently increased the risk for oral hypoglycemic agents failure by 1.70. Higher liver transaminase levels, especially in patients who had symptomatic hyperglycemia at diabetes diagnosis, associate with oral hypoglycemic agent failure. The possible pathogenetic link between transaminase and declining islet function might consist of insulin resistance and increased circulating fatty acid levels, in turn causing liver steatosis and beta-cell dysfunction.