To examine the mechanism by which metformin lowers endogenous glucose production in type 2 diabetic patients, we studied seven type 2 diabetic subjects, with fasting hyperglycemia (15.5 +/- 1.3 mmol/l), before and after 3 months of metformin treatment. Seven healthy subjects, matched for sex, age, and BMI, served as control subjects. Rates of net hepatic glycogenolysis, estimated by 13C nuclear magnetic resonance spectroscopy, were combined with estimates of contributions to glucose production of gluconeogenesis and glycogenolysis, measured by labeling of blood glucose by 2H from ingested 2H2O. Glucose production was measured using [6,6-2H2]glucose. The rate of glucose production was twice as high in the diabetic subjects as in control subjects (0.70 +/- 0.05 vs. 0.36 +/- 0.03 mmol x m(-2) min(-1), P < 0.0001). Metformin reduced that rate by 24% (to 0.53 +/- 0.03 mmol x m(-2) x min(-1), P = 0.0009) and fasting plasma glucose concentration by 30% (to 10.8 +/- 0.9 mmol/l, P = 0.0002). The rate of gluconeogenesis was three times higher in the diabetic subjects than in the control subjects (0.59 +/- 0.03 vs. 0.18 +/- 0.03 mmol x m(-2) min(-1) and metformin reduced that rate by 36% (to 0.38 +/- 0.03 mmol x m(-2) x min(-1), P = 0.01). By the 2H2O method, there was a twofold increase in rates of gluconeogenesis in diabetic subjects (0.42 +/- 0.04 mmol m(-2) x min(-1), which decreased by 33% after metformin treatment (0.28 +/- 0.03 mmol x m(-2) x min(-1), P = 0.0002). There was no glycogen cycling in the control subjects, but in the diabetic subjects, glycogen cycling contributed to 25% of glucose production and explains the differences between the two methods used. In conclusion, patients with poorly controlled type 2 diabetes have increased rates of endogenous glucose production, which can be attributed to increased rates of gluconeogenesis. Metformin lowered the rate of glucose production in these patients through a reduction in gluconeogenesis.