NAFLD is common in T2DM, linked to insulin resistance and beta-cell dysfunction, and can be assessed with validated liver scores for steatosis and fibrosis. The longitudinal impact of weight loss with or without bariatric/metabolic surgery (BMS) on NAFLD in T2DM is not clear. Patients with T2DM (N=52, age 48±9 yrs, 30 (58%) female, BMI 36.3±2.9 kg/m2, T2DM duration of 8.3±5.0 yrs, A1c 9.7±1.7%) were randomized to intensive medical therapy (IMT, n=15) alone or IMT with laparoscopic Roux-en-Y gastric bypass (RYGB, n=18) or sleeve gastrectomy (SG, n=19) . The hepatic steatosis index (HSI) , NAFLD/liver fat score, FIB-4 index, and AST-to-platelet ratio index (APRI) were calculated at baseline and 24 months and correlated to baseline and change in weight, body fat percent (assessed with iDXA) , insulin sensitivity, beta-cell function (DI) and adipocytokine measurements during mixed meal tolerance testing. Baseline steatosis liver scores were abnormal in 52 patients (100%) by HSI and 38 (73%) by NAFLD/LFS. Abnormal liver scores at baseline were correlated with higher HOMA-IR, lower adiponectin levels, and higher blood pressure. At 24 months, HSI only normalized in 10/37 (27%) BMS patients (p=0.046) . NAFLD/LFS normalized in 21/27 (78%) BMS patients and 1/ (9%) medical patients (p=0.001) . Normalization of HSI and NAFLD/LFS were associated with weight and body fat reduction (p<0.001) . Normalization of HSI was associated with improvement in Disposition index (DI) (P = 0.08) , CRP (p=0.001) , and leptin levels (p=0.016) ; change in NAFLD/LFS was associated with HOMA-IR (p<0.001) . Liver steatosis was prevalent in all T2DM undergoing BMS and medical therapy and improved in a majority of subjects who underwent BMS but not IMT. Normalization of liver scores was associated with improvement in body weight, insulin sensitivity, beta-cell function, and markers of CVD risk. These data support the use of liver scores when assessing T2DM for BMS. Disclosure A.Kodali: None. M.D.Lundholm: None. R.Vangoitsenhoven: Speaker's Bureau; Boehringer Ingelheim International GmbH, Goodlife Pharma, Lilly, Mundipharma, Novo Nordisk, Sanofi. J.P.Kirwan: None. A.Aminian: Consultant; Medtronic, Research Support; Medtronic. P.Schauer: Advisory Panel; GI Dynamics, Keyron Ltd., Persona Nutrition, Consultant; Ethicon, Inc., Medtronic, Research Support; Ethicon, Inc., Medtronic, Pacira BioSciences, Inc., Stock/Shareholder; Mediflix, Inc., SE Healthcare LLC. S.Kashyap: Advisory Panel; Fractyl Health, Inc., GI Dynamics, Research Support; Janssen Pharmaceuticals, Inc.