OBJECTIVE We examined the relationship between habitual daily physical activity and measures of glucose tolerance, insulin sensitivity, and β-cell responses in adults with impaired glucose tolerance (IGT) or drug-naive, recently diagnosed type 2 diabetes. RESEARCH DESIGN AND METHODS Participants included 230 adults (mean ± SD age 54.5 ± 8.5 years, BMI 35 ± 5.5 kg/m2; 42.6% women) who underwent a 3-h oral glucose tolerance test (OGTT) and hyperglycemic clamp. Wrist accelerometers worn for 7 consecutive days measured total physical activity counts (TAC) (daily mean 233,460 [∼50th percentile for age]). We evaluated whether TAC was associated with fasting plasma glucose, OGTT 2-h plasma glucose or glucose incremental area under the curve (G-iAUC), hyperglycemic clamp measures of insulin sensitivity (steady-state glucose infusion rate/insulin [M/I]) and β-cell responses (acute C-peptide response to glucose, steady-state C-peptide, and maximal β-cell response), and OGTT C-peptide index (ΔC-peptide0–30/Δglucose0–30). RESULTS After adjustments for confounders, there was no association of TAC with fasting plasma glucose, 2-h glucose, or G-iAUC. Higher TAC was associated with higher insulin sensitivity (M/I). After adjusting for M/I, higher TAC was not associated with measures of β-cell response. CONCLUSIONS In adults with IGT or drug-naive, recently diagnosed type 2 diabetes, higher levels of habitual physical activity are associated with higher insulin sensitivity. Further studies are needed to understand why higher levels of physical activity are not associated with better β-cell response.