We examined the effect of pioglitazone on abdominal fat distribution to elucidate the mechanisms via which pioglitazone improves insulin resistance in patients with type 2 diabetes mellitus. Thirteen type 2 diabetic patients (nine men and four women; age, 52 ± 3 yr; body mass index, 29.0 ± 1.1 kg/m²), who were being treated with a stable dose of sulfonylurea (n = 7) or with diet alone (n = 6), received pioglitazone (45 mg/d) for 16 wk. Before and after pioglitazone treatment, subjects underwent a 75-g oral glucose tolerance test (OGTT) and two-step euglycemic insulin clamp (insulin infusion rates, 40 and 160 mU/m²·min) with [³H]glucose. Abdominal fat distribution was evaluated using magnetic resonance imaging at L4–5. After 16 wk of pioglitazone treatment, fasting plasma glucose (179 ± 10 to 140 ± 10 mg/dl; P < 0.01), mean plasma glucose during OGTT (295 ± 13 to 233 ± 14 mg/dl; P < 0.01), and hemoglobin A_1c (8.6 ± 0.4% to 7.2 ± 0.5%; P < 0.01) decreased without a change in fasting or post-OGTT insulin levels. Fasting plasma FFA (674 ± 38 to 569 ± 31 μEq/liter; P < 0.05) and mean plasma FFA (539 ± 20 to 396 ± 29 μEq/liter; P < 0.01) during OGTT decreased after pioglitazone. In the postabsorptive state, hepatic insulin resistance [basal endogenous glucose production (EGP) × basal plasma insulin concentration] decreased from 41 ± 7 to 25 ± 3 mg/kg fat-free mass (FFM)·min × μU/ml; P < 0.05) and suppression of EGP during the first insulin clamp step (1.1 ± 0.1 to 0.6 ± 0.2 mg/kg FFM·min; P < 0.05) improved after pioglitazone treatment. The total body glucose MCR during the first and second insulin clamp steps increased after pioglitazone treatment [first MCR, 3.5 ± 0.5 to 4.4 ± 0.4 ml/kg FFM·min (P < 0.05); second MCR, 8.7 ± 1.0 to 11.3 ± 1.1 ml/kg FFM^·min (P < 0.01)]. The improvement in hepatic and peripheral tissue insulin sensitivity occurred despite increases in body weight (82 ± 4 to 85 ± 4 kg; P < 0.05) and fat mass (27 ± 2 to 30 ± 3 kg; P < 0.05). After pioglitazone treatment, sc fat area at L4–5 (301 ± 44 to 342 ± 44 cm²; P < 0.01) increased, whereas visceral fat area at L4–5 (144 ± 13 to 131 ± 16 cm²; P < 0.05) and the ratio of visceral to sc fat (0.59 ± 0.08 to 0.44 ± 0.06; P < 0.01) decreased. In the postabsorptive state hepatic insulin resistance (basal EGP × basal immunoreactive insulin) correlated positively with visceral fat area (r = 0.55; P < 0.01). The glucose MCRs during the first (r = −0.45; P < 0.05) and second (r = −0.44; P < 0.05) insulin clamp steps were negatively correlated with the visceral fat area. These results demonstrate that a shift of fat distribution from visceral to sc adipose depots after pioglitazone treatment is associated with improvements in hepatic and peripheral tissue sensitivity to insulin.