OBJECTIVE To compare the effect of Roux-en-Y gastric bypass (RYGB) surgery versus intensive medical diabetes and weight management (IMWM) on clinical and patient-reported outcomes in obese patients with type 2 diabetes. RESEARCH DESIGN AND METHODS We prospectively randomized 38 obese patients with type 2 diabetes (15 male and 23 female, with mean ± SD weight 104 ± 16 kg, BMI 36.3 ± 3.4 kg/m2, age 52 ± 6 years, and HbA1c 8.5 ± 1.3% [69 ± 14 mmol/mol]) to laparoscopic RYGB (n = 19) or IMWM (n = 19). Changes in weight, HbA1c, cardiovascular risk factors (UKPDS risk engine), and self-reported health status (the 36-Item Short-Form [SF-36] survey, Impact of Weight on Quality of Life [IWQOL] instrument, and Problem Areas in Diabetes Survey [PAID]) were assessed. RESULTS After 3 years, the RYGB group had greater weight loss (mean −24.9 kg [95% CI −29.5, −20.4] vs. −5.2 [−10.3, −0.2]; P < 0.001) and lowering of HbA1c (−1.79% [−2.38, −1.20] vs. −0.39% [−1.06, 0.28] [−19.6 mmol/mol {95% CI −26.0, −13.1} vs. −4.3 {−11.6, 3.1}]; P < 0.001) compared with the IMWM group. Changes in cardiometabolic risk for coronary heart disease and stroke were all more favorable in RYGB versus IMWM (P < 0.05 to P < 0.01). IWQOL improved more after RYGB (P < 0.001), primarily due to subscales of physical function, self-esteem, and work performance. SF-36 and PAID scores improved in both groups, with no difference between treatments. A structural equation model demonstrated that improvement in overall quality of life was more strongly associated with weight loss than with improved HbA1c and was manifest by greater improvements in IWQOL than with either SF-36 or PAID. CONCLUSIONS Three years after randomization to RYGB versus IMWM, surgery produced greater weight loss, lower HbA1c, reduced cardiovascular risk, and improvements in obesity-related quality of life in obese patients with type 2 diabetes.