Identifying risk factors for postpartum type 2 diabetes in women with gestational diabetes mellitus (GDM) is crucial for effective interventions. We examined whether changes in insulin sensitivity after delivery affects the risk of type 2 diabetes in women with GDM. This prospective cohort study included 347 women with GDM or gestational impaired glucose tolerance, who attended the follow-up visits at 2 months postpartum and annually thereafter. Changes in insulin sensitivity were calculated using the Matsuda index at GDM diagnosis and at 2 months postpartum (ΔMatsuda index). After excluding women with pregestational diabetes or those followed up only once, we analyzed the risk of postpartum type 2 diabetes based on the ΔMatsuda index tertiles. The incidence of type 2 diabetes at the two-month postpartum visit decreased with increasing ΔMatsuda index tertiles (16.4%, 9.5%, and 1.8%, P=0.001). During a 4.1-year follow-up, 26 out of 230 women who attended more than two follow-up visits (11.3%) developed type 2 diabetes. Compared to the lowest tertile, subjects in the highest ΔMatsuda index tertile showed a significantly reduced risk of type 2 diabetes (hazard ratio, 0.33; 95% confidence interval, 0.12 to 0.93; P=0.036) after adjusting for confounders. Improvement in insulin sensitivity after delivery is associated with a reduced risk of postpartum type 2 diabetes in women with GDM. Postpartum changes in insulin sensitivity could be a useful prediction for future type 2 diabetes development in women with GDM.