To increase our understanding of the effect of thiazolidinediones, a new class of antidiabetic drugs, on liver function as well as glycemic control, we investigated liver function before, during, and after treatment with troglitazone and pioglitazone. A total of 32 patients with type 2 diabetes were studied. Glycemic control and liver function were measured before, during, and after 4 to 12 weeks of treatment with troglitazone or pioglitazone. Glycemic control was assessed by fasting levels of plasma glucose, hemoglobin A 1c , and serum insulin, and liver function was assessed by asparatate aminotransferase (AST), alanine aminotransferase (ALT), and gamma -glutamyl transpeptidase ( gamma-GTP). Homeostasis model assessment for insulin resistance was used as an index of insulin resistance. During treatment with troglitazone, fasting plasma glucose and hemoglobin A 1c levels and homeostasis model assessment for insulin resistance were significantly decreased. Serum AST, ALT, and gamma-GTP levels were significantly decreased during treatment (AST, -17.4%; ALT, -27.2%; gamma-GTP, -47.9%) and returned to pretreatment levels after 4 weeks of withdrawal of the drug. A similar tendency was observed during treatment with pioglitazone (AST, -4.7%; ALT, -16.4%; gamma-GTP, -30.8%). These data suggest that, in contrast to the deterioration of liver function reported in a small subset of patients treated with troglitazone, treatment with thiazolidinediones was associated with a decrease in serum transaminases in most patients. The improvement in liver function parameters known to be associated with fatty liver in the present study, together with an improvement in fatty liver reported for another class of insulin sensitizers, biguanides, suggests that thiazolidinediones may have a beneficial effect on fatty liver.