Dipeptidyl peptidase 4 (DPP-4) inhibitors are proposed to lower blood glucose in type 2 diabetes mellitus (T2DM) by prolonging the activity of the circulating incretins, glucose-dependent insulinotropic polypeptide (GIP) and glucagon-like peptide 1 (GLP-1). Consistent with this mechanism of action, DPP-4 inhibitors improve glucose tolerance after meals by increasing insulin and reducing glucagon levels in the plasma. However, DPP-4 inhibitors also reduce fasting blood glucose, an unexpected effect because circulating levels of active GIP and GLP-1 are low in the postabsorptive state. The objective of the study was to examine the effects of DPP-4 inhibition on fasting islet function. We conducted a randomized, double-blind, placebo-controlled trial. The study was performed in General Clinical Research Centers at two University Hospitals. Forty-one subjects with T2DM were treated with metformin or diet, having good glycemic control with glycosylated hemoglobin values of 6.2-7.5%. Subjects were treated with vildagliptin (50 mg twice daily) or placebo for 3 months, followed by a 2-wk washout. Major Outcome Measure: We measured insulin secretion in response to iv glucose and arginine before and after treatment and after drug washout. There were small and comparable reductions in glycosylated hemoglobin in both groups over 3 months. Vildagliptin increased fasting GLP-1 levels in subjects taking metformin, but not those managed with diet, and raised active GIP levels slightly. DPP-4 inhibitor treatment improved the acute insulin and C-peptide responses to glucose (50 and 100% respectively; P < 0.05) and increased the slope of the C-peptide response to glucose (33%; P = 0.023). Vildagliptin improves islet function in T2DM under fasting conditions. This suggests that DPP-4 inhibition has metabolic benefits in addition to enhancing meal-induced GLP-1 and GIP activity.