Studies over the last few years have clearly established that at least 25% of men with type 2 diabetes have subnormal free testosterone concentrations in association with inappropriately low LH and FSH concentrations. Another 4% have subnormal testosterone concentrations with elevated LH and FSH concentrations. The Endocrine Society, therefore, now recommends the measurement of testosterone in patients with type 2 diabetes on a routine basis. The subnormal testosterone concentrations are not related to glycosylated hemoglobin or duration of diabetes, but are associated with obesity, very high C-reactive protein concentrations, and mild anemia. In addition, subnormal testosterone concentrations in these men are associated with a two to three times elevated risk of cardiovascular events and death in two early studies. Short-term studies of testosterone therapy in hypogonadal men with type 2 diabetes have demonstrated an increase in insulin sensitivity and a decrease in waist circumference. However, the data on the effect of testosterone replacement on glycemic control and cardiovascular risk factors such as cholesterol and C-reactive protein concentrations are inconsistent. As far as sexual function is concerned, testosterone treatment increases libido but does not improve erectile dysfunction and thus, phosphodiesterase inhibitors may be required. Trials of a longer duration are clearly required to definitively establish the benefits and risks of testosterone replacement in patients with type 2 diabetes and low testosterone.