OBJECTIVE Recently, the Nateglinide and Valsartan in Impaired Glucose Tolerance Outcomes Research Trial demonstrated that treatment with the angiotensin receptor blocker (ARB) valsartan for 5 years resulted in a relative reduction of 14% in the incidence of type 2 diabetes in subjects with impaired glucose metabolism (IGM). We investigated whether improvements in beta-cell function and/or insulin sensitivity underlie these preventive effects of the ARB valsartan in the onset of type 2 diabetes. RESEARCH DESIGN AND METHODS In this randomized controlled, double-blind, two-center study, the effects of 26 weeks of valsartan (320 mg daily; n = 40) or placebo (n = 39) on beta-cell function and insulin sensitivity were assessed in subjects with impaired fasting glucose and/or impaired glucose tolerance, using a combined hyperinsulinemic-euglycemic and hyperglycemic clamp with subsequent arginine stimulation and a 2-h 75-g oral glucose tolerance test (OGTT). Treatment effects were analyzed using ANCOVA, adjusting for center, glucometabolic status, and sex. RESULTS Valsartan increased first-phase (P = 0.028) and second-phase (P = 0.002) glucose-stimulated insulin secretion compared with placebo, whereas the enhanced arginine-stimulated insulin secretion was comparable between groups (P = 0.25). In addition, valsartan increased the OGTT-derived insulinogenic index (representing first-phase insulin secretion after an oral glucose load; P = 0.027). Clamp-derived insulin sensitivity was significantly increased with valsartan compared with placebo (P = 0.049). Valsartan treatment significantly decreased systolic and diastolic blood pressure compared with placebo (P < 0.001). BMI remained unchanged in both treatment groups (P = 0.89). CONCLUSIONS Twenty-six weeks of valsartan treatment increased glucose-stimulated insulin release and insulin sensitivity in normotensive subjects with IGM. These findings may partly explain the beneficial effects of valsartan in the reduced incidence of type 2 diabetes.