OBJECTIVE—The aim of this study was to test whether vascular reactivity is modified by improving metabolic control and peripheral insulin resistance in type 2 diabetes. RESEARCH DESIGN AND METHODS—In a randomized, double-blind design, we assigned 74 type 2 diabetic patients to rosiglitazone (8 mg/day), metformin (1,500 mg/day), or placebo treatment for 16 weeks and measured insulin sensitivity (euglycemic insulin clamp), ambulatory blood pressure, and forearm blood flow response to 1) intra-arterial acetylcholine (ACh), 2) intra-arterial nitroprusside, 3) the clamp, and 4) blockade of nitric oxide (NO) synthase. RESULTS—Compared with 25 nondiabetic subjects, patients had reduced insulin sensitivity (30 ± 1 vs. 41 ± 3 μmol · min−1 · kg fat-free mass−1; P < 0.001) and reduced maximal response to ACh (586 ± 42 vs. 883 ± 81%; P < 0.001). Relative to placebo, 16 weeks of rosiglitazone and metformin similarly reduced fasting glucose (−2.3 ± 0.5 and −2.3 ± 0.5 mmol/l) and HbA1c (−1.2 ± 0.3 and −1.6 ± 0.3%). Insulin sensitivity increased with rosiglitazone (+6 ± 3 μmol · min−1 · kg fat-free mass−1; P < 0.01) but not with metformin or placebo. Ambulatory diastolic blood pressure fell consistently (−2 ± 1 mmHg; P < 0.05) only in the rosiglitazone group. Nitroprusside dose response, clamp-induced vasodilatation, and NO blockade were not affected by either treatment. In contrast, the slope of the ACh dose response improved with rosiglitazone (+40% versus baseline, P < 0.05, +70% versus placebo, P < 0.005) but did not change with either metformin or placebo. This improvement in endothelium-dependent vasodilatation was accompanied by decrements in circulating levels of free fatty acids and tumor necrosis factor-α. CONCLUSIONS—At equivalent glycemic control, rosiglitazone, but not metformin, improves endothelium dependent vasodilatation and insulin sensitivity in type 2 diabetes.