Lifestyle modification reduces the risk of developing type 2 diabetes and may have its effect through improving insulin sensitivity, beta-cell function, or both. To determine whether diet and exercise improve insulin sensitivity and/or beta-cell function and to evaluate these effects over time, we quantified insulin sensitivity and the acute insulin response to glucose (AIRg) in 62 Japanese Americans (age 56.5 +/- 1.3 years; mean +/- SE) with impaired glucose tolerance (IGT) who were randomized to the American Heart Association (AHA) Step 2 diet plus endurance exercise (n = 30) versus the AHA Step 1 diet plus stretching (n = 32) for 24 months. beta-Cell function (disposition index [DI]) was calculated as S(i) x AIRg, where S(i) is the insulin sensitivity index. The incremental area under the curve for glucose (incAUCg) was calculated from a 75-g oral glucose tolerance test. Intra-abdominal fat (IAF) and subcutaneous fat (SCF) areas were measured by computed tomography. At 24 months, the Step 2/endurance group had lower weight (63.1 +/- 2.4 vs. 71.3 +/- 2.9 kg; P = 0.004) and IAF (75.0 +/- 7.9 vs. 112.7 +/- 10.4 cm(2); P = 0.03) and SCF (196.5 +/- 18.0 vs. 227.7 +/- 19.9 cm(2); P < 0.001) areas, greater S(i) (4.7 +/- 0.5 vs. 3.3 +/- 0.3 x 10(-5) min . pmol(-1) . l(-1); P = 0.01), and a trend toward lower AIRg (294.9 +/- 50.0 vs. 305.4 +/- 30.0 pmol/l; P = 0.06) and incAUCg (8,217.3 +/- 350.7 vs. 8,902.0 +/- 367.2 mg . dl(-1) . 2 h(-1); P = 0.08) compared with the Step 1/stretching group after adjusting for baseline values. There was no difference in the DI (P = 0.7) between the groups. S(i) was associated with changes in weight (r = -0.426, P = 0.001) and IAF (r = -0.395, P = 0.003) and SCF (r = -0.341, P = 0.01) areas. Thus, the lifestyle modifications decreased weight and central adiposity and improved insulin sensitivity in Japanese Americans with IGT. However, such changes did not improve beta-cell function, suggesting that this degree of lifestyle modifications may be limited in preventing type 2 diabetes over the long term.