Pioglitazone has been shown to improve the lipid profile of patients with type 2 diabetes. This study aimed to determine its mechanism of action in 27 patients with well-controlled type 2 diabetes and 7 sex- age- and body mass index matched non-diabetic controls. Patients were randomized to pioglitazone (45mg/day) or placebo for 16 weeks. The rate of appearance of endogenous glycerol (Ra) was used as a marker of lipolysis in the fasting state and 6 hours following a meal. When compared to controls, patients with diabetes had higher postprandial profiles of plasma triglycerides, free fatty acids and β-hydroxybutyrate and a decreased suppression of endogenous glycerol Ra. Results show that in patients with type 2 diabetes, whole body lipolysis is insulin resistant and that pioglitazone improves the insulin sensitivity of lipolysis, thereby contributing to improve dyslipidemia. However, a direct link between improved adipose tissue insulin resistance and blood lipid profile could not be made and further studies are needed.