This study examined the relationship of hepatic and peripheral insulin sensitivity and beta-cell secretory function with serum sex hormone-binding globulin (SHBG) in men and women with Type 2 diabetes mellitus (DM). Fasting insulin, glucose and SHBG were measured in 58 Type 2 diabetic patients of both sexes (36 men) who were on diet treatment only and terms for insulin sensitivity and beta-cell secretion obtained by modelling. There was no significant difference in SHBG between men and women despite similar degree of obesity. SHBG was positively correlated (r = 0.41, p < 0.01) to hepatic insulin sensitivity derived from mathematical modelling of fasting glucose and insulin data using the homeostasis assessment model (HOMA). This relationship was independent of gender (men, r = 0.48, p < 0.01; women, r = 0.45, p < 0.05). Fasting insulin correlated negatively with SHBG in men (r = -0.34, p < 0.05). There were also significant negative correlations between SHBG and either plasma glucose (r = -0.29, p < 0.05) or body mass index (r = -0.34, p < 0.05). SHBG did not correlate with HOMA-modelled beta-cell function. In a multiple regression analysis, SHBG was independently correlated only with insulin sensitivity (p < 0.05). Further studies in 15 of the diabetic patients (11 men), showed a significant positive correlation (r = 0.52, p < 0.05) between SHBG and peripheral insulin sensitivity derived by continuous infusion of glucose with model assessment (CIGMA) but not between SHBG and CIGMA-modelled beta-cell function. These results indicate that both hepatic and peripheral insulin sensitivity are similarly related to serum SHBG in Type 2 diabetes of both sexes. The sex-difference in SHBG was abolished in the patients.