Background: While metformin is the first line treatment in type 2 diabetes, the best way to escalate therapy is not always clear, particularly whether to add one or two oral agents or to introduce insulin. Methods: Thirty-six patients inadequately controlled on metformin and sulfonylurea/meglitinide were randomized to receive add-on therapy with insulin glargine or pioglitazone for 26 weeks. Insulin was up-titrated to achieve fasting plasma glucose < 6 mmol/l. Pioglitazone was increased to 45 mg/day after 16 weeks if HbA1c > 6.2%. beta- Cell function and insulin sensitivity were assessed by measuring insulin, proinsulin and adiponectin, and in a subgroup using a combined glucagon-stimulated C-peptide test and insulin tolerance test (GITT). Lipids and natriuretic peptides were measured at start and end of study. Results: The reduction in HbA1c was slightly greater in the insulin glargine group and used as co-variate when analysing other variables. The effect on beta-cell function was more favourable with insulin glargine measured by proinsulin (42 +/- 48 to 19 +/- 16, p = 0.01 vs. 36 +/- 26 to 27 +/- 16 p = 0.04) while the improvement in insulin sensitivity measured by adiponectin (7.5 +/- 3.7 to 15 +/- 10, p < 0.01 vs. 8.7 +/- 4 to 7.6 +/- 3, p = 0.04) and HDL cholesterol (1.10 +/- 0.24 to 1.24 +/- 0.3, p < 0.01 vs. 1.08 +/- 0.35 to 1.04 +/- 0.33, ns) (all p between groups < 0.01) was more favourable in pioglitazone group. Pioglitazone caused significant increase in natriuretic peptides (BNP pmol/16.6 +/- 5.2 to 13.7 +/- 16.1, p = 0.04 vs. 8.8 +/- 11.6 to 8.6 +/- 10.6, ns, p between groups 0.028). Conclusions: The results demonstrate characteristic differences in the effects of insulin glargine vs. pioglitazone on measures of p-cell function and insulin sensitivity as well as cardiac load. (c) 2008 Elsevier Ireland Ltd. All rights reserved.