Non-insulin dependent diabetes mellitus (NIDDM) is characterized by abnormalities of insulin secretion and insulin action. Previous studies have indicated some improvement in insulin action in vivo with weight loss in these subjects. It has not been clear, however, whether the changes in insulin action are due to changes in the sensitivity of the insulin sensitive processes or to a change in the capacity for glucose metabolism. To assess the mechanisms of the improvement of insulin action in subjects with NIDDM, we have performed a series of measures of in vivo insulin action to assess insulin sensitivity and capacity for glucose metabolism in subjects with NIDDM before and after weight loss. We also performed in vitro studies of isolated abdominal adipocytes from the same subjects. In addition, it has been known for some time that the reduction in glycemia in subjects with NIDDM after weight loss is associated with a reduction of the rate of hepatic glucose production. It is possible that the decrease in hepatic glucose production in these subjects is, in part, due to a reduction in the rate of the glucose recycling through the Cori cycle. Our results shown that the improvement in insulin action in subjects with NIDDM after weight loss is the result of an improvement in the capacity for insulin action rather than a change in insulin sensitivity in vivo. There were no associated changes in isolated adipocytes to accompany the changes that were observed in in vivo insulin action. Also, we observed increased rates of the Cori cycle, as measured by 1-C-13- glucose recycling, in subjects with NIDDM which tended to decrease with weight loss but did not return to the levels observed in equally obese subjects with normal glucose tolerance.