Objective: Obesity and aging increase the risk of type 2 diabetes (T2D). We evaluated whether weight loss therapy improves pancreatic endocrine function and insulin sensitivity in obese older adults. Methods and Procedures: Twenty-four obese (BMI: 38 ± 2 kg/m2) older (age: 70 ± 2 years) adults completed a 6-month randomized, controlled trial. Participants were randomized to diet and exercise (treatment group) or no therapy (control group). β-Cell function (assessed using the C-peptide minimal model), α-cell function (assessed by the glucagon response to an oral glucose load), insulin sensitivity (assessed using the glucose minimal model), and insulin clearance rate were evaluated using a 5-h modified oral glucose tolerance test. Results: Body weight decreased in the treatment group, but did not change in the control group (-9 ± 1% vs. 0 ± 1%; P < 0.001). Insulin sensitivity doubled in the treatment group and did not change in the control group (116 ± 49% vs. -11 ± 13%; P < 0.05). Even though indices of β-cell responsivity to glucose did not change (P > 0.05), the disposition index (DI), which adjusts β-cell insulin response to changes in insulin sensitivity, improved in the treatment group compared with the control group (100 ± 47% vs. -22 ± 9%; P < 0.05). The glucagon response decreased in the treatment but not in the control group (-5 ± 2% vs. 4 ± 4%; P < 0.05). Insulin secretion rate did not change (P > 0.05), but insulin clearance rate increased (51 ± 25%; P < 0.05), resulting in lower plasma insulin concentrations. Discussion: Weight loss therapy concomitantly improves β-cell function, lowers plasma glucagon concentrations, and improves insulin action in obese older adults. These metabolic effects are likely to reduce the risk of developing T2D in this population.