Abstract Context Studies suggest that menopausal hormone therapy (MHT) prevents type 2 diabetes (T2D). The combination of conjugated estrogens (CE) with the selective estrogen receptor modulator bazedoxifene (BZA) is an MHT that improves obesity and T2D in preclinical models of menopausal metabolic syndrome. The effect of CE/BZA on adiposity and glucose homeostasis in obese postmenopausal women is unknown. Objective To investigate the effect of CE/BZA on body composition, glucose homeostasis, and markers of inflammation in obese postmenopausal women. Research Design, Intervention, and Participants Randomized, double-blind, placebo-controlled pilot trial of 12 obese menopausal women assigned to 12-week treatment with CE 0.45 mg/BZA 20 mg (n = 7) or placebo (n = 5). At baseline and after 12 weeks, we assessed body composition (dual-energy X-ray absorptiometry), glucose homeostasis (IV glucose tolerance test), and inflammation biomarkers. Results Women treated with CE/BZA exhibited increased β cell function using homeostatic model assessment-B [median (interquartile range) CE/BZA vs placebo: 18.5 (−0.9 to 320.6) μU/mM vs −25.5 (−39.9 to −0.1) μU/mM; P = 0.045], and decreased basal glucose concentrations (Gb) [−5.2 (−9.2 to −1.7) mg/dL vs 2.7 (0.9 to 4.9) mg/dL; P = 0.029]. Insulin sensitivity was higher in the placebo arm [1.35 (1.12 to 1.82) (μU/mL) min−1 vs −0.24 (−1.50 to 0.19) (μU/mL) min−1; P = 0.029]. No changes between treatment groups were observed for the acute insulin response to glucose (AIRg), the disposition index (DI), body composition, and inflammatory biomarkers. Conclusions A 12-week treatment of obese postmenopausal women with CEs/BZA improves fasting β cell function and glucose concentrations without change in AIRg, HOMA-IR, DI, body composition, or markers of inflammation.