Although the marked and durable effects of bariatric surgery on early type 2 diabetes is known, there are limited data on the impact of surgery in patients with reduced beta-cell function/reserve. Clinical outcomes of 15 morbidly obese patients with poorly controlled diabetes who underwent bariatric surgery in a 10-year period and had a baseline fasting serum c-peptide ≤0.5 ng/mL were assessed. All patients had glycated hemoglobin >7 % and were on insulin before surgery. Surgical procedures included laparoscopic gastric bypass (n = 9), sleeve (n = 5), and banding (n = 1) without any intraoperative complications. At a mean follow-up of 39.6 ± 22.9 months, a mean reduction in body mass index of 25.1 ± 9.2 % and a mean percent excess weight loss of 61.5 ± 19.7 % were associated with a significant improvement in daily insulin requirement and lipid profile. At the last follow-up point, three patients (20 %) were off insulin, five patients (33.3 %) had a glycated hemoglobin ≤7 %, and one patient (6.7 %) had remission of diabetes. Hypertension resolved or improved in 5 of 11 (45.5 %) hypertensive patients. In conclusion, bariatric surgery can result in improvement of glycemic status and comorbid conditions of obese diabetic patients with diminished beta-cell reserve and may facilitate medical management of diabetes.