OBJECTIVE While vitamin E has shown to improve nonalcoholic steatohepatitis (NASH) in patients without diabetes, information on patients with type 2 diabetes mellitus (T2DM) is lacking. The aim of this study was to determine whether vitamin E, alone or combined with pioglitazone, improves histology in patients with T2DM and NASH. RESEARCH DESIGN AND METHODS This was a proof-of-concept, randomized, double-blind, placebo-controlled trial conducted from 2010 to 2016. Patients with T2DM and biopsy-proven NASH (n = 105) were randomized to vitamin E 400 IU b.i.d., vitamin E 400 IU b.i.d. plus pioglitazone 45 mg/day, or placebo. Eighty-six patients completed the 18-month study. The primary end point was a two-point reduction in the nonalcoholic fatty liver disease activity score from two different parameters, without worsening of fibrosis. Secondary outcomes were resolution of NASH without worsening of fibrosis, individual histological scores, and metabolic parameters. RESULTS More patients on combination therapy achieved the primary outcome versus placebo (54% vs. 19%, P = 0.003) but not with vitamin E alone (31% vs. 19%, P = 0.26). Both groups showed improvements in resolution of NASH compared with placebo (combination group: 43% vs. 12%, P = 0.005; vitamin E alone: 33% vs. 12%, P = 0.04). While steatosis assessed by histology improved with combination therapy (P < 0.001) and vitamin E alone (P = 0.018), inflammation (P = 0.018) and ballooning (P = 0.022) only improved with combination therapy. No improvement in fibrosis was observed in any group. CONCLUSIONS In this proof-of-concept study, combination therapy was better than placebo in improving liver histology in patients with NASH and T2DM. Vitamin E alone did not significantly change the primary histological outcome.