A 60-year-old obese woman with type II diabetes mellitus and hepatomegaly exhibited progression of steatosis to hepatitis and cirrhosis. The patient was treated with large amounts of insulin combined with sulfonylurea, resulting in correction of the hyperglycemia. In the subsequent 9 months, weight loss did not occur, whereas insulin therapy could be discontinued. The liver decreased in size, and liver tests normalized. We suggest that intensive treatment of hyperglycemia may result in reversal of insulin resistance in patients with diabetic liver disease, while correction of hyperglycemia can lead to resolution of the hepatic abnormalities associated with diabetes mellitus.