The objective of this study was to determine the metabolic effects of estrogen replacement therapy in postmenopausal women with type 2 diabetes. Twenty-five postmenopausal, type 2 diabetic women completed a randomized, blinded, cross-over trial of conjugated equine estrogen, 0.625 mg/day, vs. placebo for 8 weeks, separated by a 4-week washout period. When compared with 8 weeks of placebo, estrogen reduced fasting serum glucose (7.2 +/- 0.3 vs. 8.4 +/- 0.4 mmol/L, P = 0.0003), glycated hemoglobin (8.7 +/- 0.4% vs. 9.3 +/- 0.4%, P = 0.04), total cholesterol (5.27 +/- 0.20 vs. 5.50 +/- 0.21 mmol/L, P = 0.04), low-density lipoprotein cholesterol (2.47 +/- 0.13 vs. 2.69 +/- 0.14 mmol/L, P = 0.02), serum apolipoprotein B (114 +/- 6 vs. 121 +/- 5 mg/dL, P = 0.03), and postprandial glucose area under the curve (by 12%, P = 0.015). Estrogen replacement therapy also increased high-density lipoprotein (HDL) cholesterol (1.27 +/- 0.08 vs. 1.1 +/- 0.07 mmol/L, P = 0.0002), high-density lipoprotein(2) cholesterol (0.41 +/- 0.04 vs. 0.30 +/- 0.03 mmol/L, P = 0.0001), and fasting triglyceride (2.17 +/- 0.21 vs. 1.94 +/- 0.16 mg/dL, P = 0.02) concentrations but not postprandial triglyceride area under the curve (P = not significant). We conclude that estrogen replacement therapy improves glycemic control, blood lipoproteins, and apolipoprotein B concentrations while modestly increasing triglyceride levels in postmenopausal, type 2 diabetic women.