Elevated plasma free fatty acid (FFA) levels are responsible for much of the insulin resistance in obese patients with type 2 diabetes. To lower plasma FFA levels effectively and long term, we have treated eight obese patients with type 2 diabetes for 2 months with placebo followed by 2 months of treatment with a combination of rosiglitazone (RGZ) (8 mg/day) and fenofibrate (FFB) (160 mg/day) in a single-blind placebo-controlled study design. Compared with placebo, RGZ/FFB lowered mean 24-h plasma FFA levels 30% (P < 0.03) and mean 24-h glucose levels 23% (P < 0.03) and increased insulin-stimulated glucose uptake (glucose rate of disappearance [G(R)(d)], determined using euglycemic-hyperinsulinemic clamp) 442% (P < 0.01), oral glucose tolerance (area under the curve for 3-h oral glucose tolerance test) 28% (P < 0.05), and plasma adiponectin levels 218% (P < 0.01). These RGZ/FFB results were compared with results obtained in five patients treated with RGZ alone. RGZ/FFB prevented the fluid retention usually associated with RGZ (-1.6 vs. 5.6%, P < 0.05), lowered fasting plasma FFA more effectively than RGZ alone (-22 vs. 5%, P < 0.05), and tended to be more effective than RGZ alone in lowering A1C (-0.9 vs. -0.4%) and triglyceride levels (-38 vs. -5%) and increasing G(Rd) (442 vs. 330%). We conclude that RGZ/FFB is a promising new therapy for type 2 diabetes that lowers plasma FFA more than RGZ alone and in contrast to RGZ does not cause water retention and weight gain.