Abstract Context Bone turnover markers (BTMs) are lower in type 2 diabetes mellitus (T2D). The relationships between bone turnover, β-cell function, and insulin sensitivity in T2D are uncertain. Objective To investigate if fasting levels of BTMs in persons with T2D are associated with β-cell function or insulin sensitivity. Methods We defined three T2D phenotypes, the insulinopenic (low β-cell function, high insulin sensitivity), the classical (low β-cell function, low insulin sensitivity), and the hyperinsulinemic (high β-cell function, low insulin sensitivity) phenotypes, in the Danish Centre for Strategic Research T2D cohort using the homeostatic model assessment. We selected age- and gender-matched subgroups to represent the three T2D phenotypes, yielding 326 glucose-lowering treatment–naïve persons with T2D. Median values of BTMs between the three T2D phenotypes were compared. Regression models were applied to assess the association between BTMs, β-cell function, and insulin sensitivity adjusted for potential confounders. Results Median serum levels of procollagen type I N-terminal propeptide, C-terminal telopeptide of type I collagen, and osteocalcin were higher in the insulinopenic phenotype (52.3 μg/L, IQR 41.6, 63.3; 259.4 ng/L, IQR 163.4, 347.7; and 18.0 μg/L, IQR 14.4, 25.2, respectively) compared with the classical (41.4, IQR 31.0, 51.4; 150.4 IQR 103.5, 265.1; 13.1, IQR 10.0, 17.6, respectively) and the hyperinsulinemic (43.7, IQR 32.3, 57.3; 163.3, IQR 98.9, 273.1; 15.7 IQR 10.2, 20.8, respectively) phenotypes (all P < .01). These differences persisted after adjustment for age, sex, waist to hip ratio, or fasting plasma glucose (P < .01). Conclusion BTMs are lower in newly diagnosed persons with T2D characterized by low insulin sensitivity.