In the Diabetes Prevention Program, treatment of subjects with impaired glucose tolerance with metformin >3.2 years reduced the risk of developing type 2 diabetes by 30% compared with placebo. This study describes the mechanisms of this effect. In proportional hazards regression models with 2,155 subjects, changes in weight, the insulinogenic index (IGR), fasting insulin, and proinsulin were predictive of diabetes, though to different degrees within each group. The mean change in weight, fasting insulin, and proinsulin, but not IGR, differed between groups during the study. The 1.7-kg weight loss with metformin versus a 0.3-kg gain with placebo alone explained 64% of the beneficial metformin effect on diabetes risk. Adjustment for weight, fasting insulin, proinsulin, and other metabolic factors combined explained 81% of the beneficial metformin effect, but it remained nominally significant (P = 0.034). After the addition of changes in fasting glucose, 99% of the group effect was explained and is no longer significant. Treatment of high-risk subjects with metformin results in modest weight loss and favorable changes in insulin sensitivity and proinsulin, which contribute to a reduction in the risk of diabetes apart from the associated reductions in fasting glucose.