The Diabetes Remission Clinical Trial reported return and persistence of non-diabetic blood glucose control in 46% of people with type 2 diabetes of up to 6 years duration. Detailed metabolic studies were performed on a subgroup (intervention, n = 64; control, n = 26). In the intervention group, liver fat content decreased (16.0% ± 1.3% to 3.1% ± 0.5%, p < 0.0001) immediately after weight loss. Similarly, plasma triglyceride and pancreas fat content decreased whether or not glucose control normalized. Recovery of first-phase insulin response (0.04[−0.05–0.32] to 0.11[0.0005–0.51] nmol/min/m², p < 0.0001) defined those who returned to non-diabetic glucose control and this was durable at 12 months (0.11[0.005–0.81] nmol/min/m², p = 0.0001). Responders were similar to non-responders at baseline but had shorter diabetes duration (2.7 ± 0.3 versus 3.8 ± 0.4 years; p = 0.02). This study demonstrates that β cell ability to recover long-term function persists after diagnosis, changing the previous paradigm of irreversible loss of β cell function in type 2 diabetes.