The contribution of endogenous insulin secretion to glycemic variability (GV) may differ between patients with impaired insulin secretion and those with preserved secretion. Our objective was to determine the linearity of the relationship between fasting C-peptide (CPR) as a marker of endogenous insulin secretion and GV in type 2 diabetes (T2DM), regardless of the type of antidiabetic treatment. We conducted a prospective observational study using continuous glucose monitoring obtained from 284 Japanese outpatients with T2DM with various HbA1c values and antidiabetic treatment. We constructed a prediction curve of base-line CPR versus coefficient of variation (CV) and identified the clinical factors associated with CV using multiple regression analysis. Fasting CPR showed a significant negative log-linear relationship with CV (P < 0.0001), and the latter being strikingly high in the low-CPR group. The multiple regression analysis showed that low CPR was an independent predictor of high CV (P < 0.0001). The significant correlations were sustained in both patients with/without insulin treatment. The contribution of endogenous insulin secretion to GV depends on the extent of insulin secretion impairment. Fasting CPR may represent a useful indicator of GV instability in T2DM.