The purpose of this study is to compare the effect of diabetes control induced by Roux-en-Y gastrojejunostomy(RY) vs Billroth-I reconstruction(BI) after distal gastrectomy in patients with early gastric cancer(EGC) and type 2 diabetes(T2DM). Forty EGC patients with T2DM, aged 20-80 years, who were expected to undergo curative distal gastrectomy were randomized 1:1 to RY(n = 20) or BI(n = 20). Diabetes medication status, biochemical and hormonal data including blood glucose, HbA1c, insulin, C-peptide, HOMA-IR, ghrelin, leptin, GLP-1, PYY, and GIP were evaluated for 12 months after surgery. Although pre- and postoperative 12-month fasting and postprandial glucose levels did not show a significant difference, HbA1c, C-peptide, and HOMA-IR levels were significantly improved at 12 months after surgery in both BI and RY groups. Sixty percent of RY patients and 20% of BI patients decreased their medication satisfying FBS<126 mg/dL and HbA1c<6.5% and 5% of BI patients stopped their medication satisfying the criteria of FBS<126 mg/dL and HbA1c<6.0%. The improvement patterns were more sustainable with less fluctuation in RY than in BI. On hormonal analysis, ghrelin and leptin levels were decreased and PYY and GIP levels were increased at 12 months after surgery in both groups without significant difference according to the reconstruction type and diabetic improvement status except ghrelin. In gastric cancer surgery, RY reconstruction showed better and more durable diabetes control compared to BI during the first year after surgery. Gastric cancer surgery led to decreased ghrelin and leptin and increased PYY and GIP, which might have a role in improving insulin resistance and glucose homeostasis.