OBJECTIVE: Obesity is an important risk factor for type 2 diabetes. Weight loss in patients with type 2 diabetes is associated with improved glycemic control and reduced cardiovascular disease risk factors, but weight loss is notably difficult to achieve and sustain with caloric restriction and exercise. The purpose of this study was to assess the impact of treatment with orlistat, a pancreatic lipase inhibitor, on weight loss, glycemic control, and serum lipid levels in obese patients with type 2 diabetes on sulfonylurea medications. RESEARCH DESIGN AND METHODS: In a multicenter 57-week randomized double-blind placebo-controlled study, 120 mg orlistat or placebo was administered orally three times a day with a mildly hypocaloric diet to 391 obese men and women with type 2 diabetes who were aged > 18 years, had a BMI of 28–40 kg/m2, and were clinically stable on oral sulfonylureas. Changes in body weight, glycemic control, lipid levels, and drug tolerability were measured. RESULTS: After 1 year of treatment, the orlistat group lost 6.2 ± 0.45% (mean ± SEM) of initial body weight vs. 4.3 ± 0.49% in the placebo group (P < 0.001). Twice as many patients receiving orlistat (49 vs. 23%) lost ≥ 5% of initial body weight (P < 0.001). Orlistat treatment plus diet compared with placebo plus diet was associated with significant improvement in glycemic control, as reflected in decreases in HbA1c (P < 0.001) and fasting plasma glucose (P < 0.001) and in dosage reductions of oral sulfonylurea medication (P < 0.01). Orlistat therapy also resulted in significantly greater improvements than placebo in several lipid parameters, namely, greater reductions in total cholesterol, (P < 0.001), LDL cholesterol (P < 0.001), triglycerides (P < 0.05), apolipoprotein B (P < 0.001), and the LDL-to-HDL cholesterol ratio (P < 0.001). Mild to moderate and transient gastrointestinal events were reported with orlistat therapy, although their association with study withdrawal was low. Fat-soluble vitamin levels generally remained within the reference range, and vitamin supplementation was required in only a few patients. CONCLUSIONS: Orlistat is an effective treatment modality in obese patients with type 2 diabetes with respect to clinically meaningful weight loss and maintenance of weight loss, improved glycemic control, and improved lipid profile.