Roux-en-Y gastric bypass (RYGB) improves glycemic control within days after surgery, and changes in insulin sensitivity and β-cell function are likely to be involved. We studied 10 obese patients with type 2 diabetes (T2D) and 10 obese glucose-tolerant subjects before and 1 week, 3 months, and 1 year after RYGB. Participants were included after a preoperative diet-induced total weight loss of −9.2 ± 1.2%. Hepatic and peripheral insulin sensitivity were assessed using the hyperinsulinemic- euglycemic clamp combined with the glucose tracer technique, and β-cell function was evaluated in response to an intravenous glucose-glucagon challenge as well as an oral glucose load. Within 1 week, RYGB reduced basal glucose production, improved basal hepatic insulin sensitivity, and increased insulin clearance, highlighting the liver as an important organ responsible for early effects on glucose metabolism after surgery. Insulin-mediated glucose disposal and suppression of fatty acids did not improve immediately after surgery but increased at 3 months and 1 year; this increase likely was related to the reduction in body weight. Insulin secretion increased after RYGB only in patients with T2D and only in response to oral glucose, underscoring the importance of the changed gut anatomy.