OBJECTIVE: Traditional blood glucose-lowering agents do not sustain adequate glycemic control in most type 2 diabetic patients. Preclinical studies with exenatide have suggested sustained improvements in beta-cell function. We investigated the effects of 52 weeks of treatment with exenatide or insulin glargine followed by an off-drug period on hyperglycemic clamp-derived measures of beta-cell function, glycemic control, and body weight. RESEARCH DESIGN AND METHODS: Sixty-nine metformin-treated patients with type 2 diabetes were randomly assigned to exenatide (n = 36) or insulin glargine (n = 33). beta-Cell function was measured during an arginine-stimulated hyperglycemic clamp at week 0, at week 52, and after a 4-week off-drug period. Additional end points included effects on glycemic control, body weight, and safety. RESULTS: Treatment-induced change in combined glucose- and arginine-stimulated C-peptide secretion was 2.46-fold (95% CI 2.09-2.90, P < 0.0001) greater after a 52-week exenatide treatment compared with insulin glargine treatment. Both exenatide and insulin glargine reduced A1C similarly: -0.8 +/- 0.1 and -0.7 +/- 0.2%, respectively (P = 0.55). Exenatide reduced body weight compared with insulin glargine (difference -4.6 kg, P < 0.0001). beta-Cell function measures returned to pretreatment values in both groups after a 4-week off-drug period. A1C and body weight rose to pretreatment values 12 weeks after discontinuation of either exenatide or insulin glargine therapy. CONCLUSIONS: Exenatide significantly improves beta-cell function during 1 year of treatment compared with titrated insulin glargine. After cessation of both exenatide and insulin glargine therapy, beta-cell function and glycemic control returned to pretreatment values, suggesting that ongoing treatment is necessary to maintain the beneficial effects of either therapy.