As ectopic fat accumulation and changes in adipokines are believed to contribute to obesity and type 2 diabetes-related insulin resistance, this study investigated the impact of two insulin-sensitizing drugs (pioglitazone and metformin) on body fat distribution, intracellular lipid content in skeletal muscle and liver, and adipokine concentrations in 41 subjects with type 2 diabetes. Pioglitazone treatment reduced hepatic lipid content and intramyocellular lipid content while metformin only reduced intramyocellular lipid content over the six-month intervention period. Moreover, only pioglitazone treatment significantly reduced the ratio of intra-abdominal (visceral)/subcutaneous fat and retinol-binding protein 4 levels while markedly increasing adiponectin concentrations. Pioglitazone may therefore improve insulin sensitivity by affecting adipokine concentrations and ectopic fat in patients with type 2 diabetes.