Inclusion Criteria (during Screening and Run-in period):

• Diabetes by ADA criteria (laboratory determinations of fasting glucose ≥ 126 mg/dL, random glucose ≥ 200 mg/dL, or two-hour OGTT glucose ≥ 200 mg/dL) documented and confirmed in medical record. For patients diagnosed with diabetes during screening who have a normal fasting glucose but an elevated two-hour glucose during an OGTT, the HbA1c must be ≥ 6%.
• Duration since diagnosis less than two years by date of randomization.
• BMI ≥ 85th percentile documented at time of diagnosis or at screening.
• Fasting C-peptide at screening (drawn at least one week after treatment for ketosis or acidosis, if applicable) > 0.6 ng/mL.
• Absence of pancreatic autoimmunity (both GAD and ICA512 negative).
• Age 10-17, with randomization prior to 18th birthday.
• Signed informed consent/assent forms for the pre-randomization period.
• A family member or adult closely involved in the daily activities of the child agrees to participate in the child's treatment.
• Fluency in English or Spanish for both child and family member.
• Patient and family able to fully participate in trial protocol in the opinion of the investigator.

Exclusion Criteria (during Screening and Run-in period):

• Participating in another interventional research study protocol in the past 30 days.
• Genetic syndrome or disorder known to affect glucose tolerance other than diabetes.
• Patient on inhaled steroids at dose above 1000 mcg daily Flovent equivalent.
• Patient on a course of oral steroids within the last 60 days or on oral steroids more than 20 days during the past year.
• Patient on medication(s) that are known to affect insulin sensitivity or secretion within the last 30 days.
• Patient on medication(s) that are known to cause weight gain within the last 30 days.
• Patient on any weight-loss medication(s) within the last 30 days.
• Patient on medication(s) known to affect the metabolism of study drug.
• Inability to comprehend the lowest grade level at which lifestyle intervention materials are prepared, for both child and participating family member.
• Females who are pregnant, planning to become pregnant within two years of enrollment, or who admit sexual activity without appropriate contraception.
• Calculated creatinine clearance < 70 mL/min.
• Any transaminase > 2.5 ULN. If any transaminase 1.5-2.5 times ULN, then patient must be appropriately evaluated by PCP (minimum evaluation includes ceruloplasmin level, alpha-1 antitrypsin phenotype, ANA, anti-smooth muscle antibody, anti-LKM antibody, anti-HCV, and anti-HBc total antibody not IgM, iron, and TIBC) and is eligible if all other causes for elevation are ruled out and it is presumed due only to non-alcoholic fatty liver disease (NAFLD).
• Diabetic ketoacidosis (DKA) at any time after diagnosis unless only a single episode of DKA related to a significant medical illness.
• Physical limitations preventing patient from being randomized to the lifestyle intervention.
• Patient plans to leave the geographic area within one calendar year.
• Abnormal reticulocyte count or HbA1c chromatogram at time of screening.
• Admitted use of anabolic steroids within the past 60 days.
• Other significant organ system illness or condition (including psychiatric or developmental disorder) that would prevent participation in the opinion of the investigator.
• Patient participates in a formal weight-loss program.

Inclusion Criteria (post Run-in and Randomization):

• Duration since diagnosis less than 2 years at randomization.
• HbA1c < 8% on metformin alone.
• Age 10-17, with randomization before patient is 18 years old.
• Signed consent/assent forms for randomization and the post-randomization phase.
• A family member or adult closely involved in the daily activities of the child agrees to participate in the child's treatment.
• Fluency in English or Spanish for both child and family member.
• Patient and family able to fully participate in trial protocol in the opinion of the investigator.

Exclusion Criteria (post Run-in and Randomization):

• Refractory hypertension: average systolic blood pressure ≥ 150 mmHg or average diastolic blood pressure ≥ 95 mmHg despite appropriate medical therapy.
• Refractory hyperlipidemia: total cholesterol > 300 mg/dL or LDL > 190 mg/dL or triglycerides > 800 mg/dL, despite appropriate medical therapy.
• Refractory anemia: hematocrit < 30% or hemoglobin < 10 gm/dL despite appropriate medical therapy.
• Patient on a thiazolidinedione (TZD) within the last 12 weeks.
• Patient on non-study diabetes medications within the past 6 weeks.
• Patient on inhaled steroids at dose above 1000 mcg daily Flovent equivalent.
• Patient on a course of oral steroids within the last 60 days or on oral steroids more than 20 days during the past year.
• Patient on medication(s) that are known to affect insulin sensitivity or secretion within the last 30 days.
• Patient on medication(s) that are known to cause weight gain within the last 30 days.
• Patient on any weight-loss medication(s) within the last 30 days.
• Patient on medication(s) known to affect the metabolism of study drug.
• Inability to comprehend the lowest grade level at which lifestyle intervention materials are prepared, for both child and participating family member, assessed by mastery of standard diabetes education program administered during run-in.
• Inability to comply with requirements of study during run-in period.
• Females who are pregnant, planning to become pregnant within two years of enrollment, or who admit sexual activity without appropriate contraception.
• Calculated creatinine clearance < 70 mL/min.
• Physical limitations preventing patient from being randomized to the lifestyle intervention.
• Patient plans to leave the geographic area within one calendar year.
• Admitted use of anabolic steroids within 60 days.
• Other significant organ system illness or condition (including psychiatric or developmental disorder) that would prevent participation in the opinion of the investigator.
• Patient participates in a formal weight loss program.
• Episode of DKA during the run-in.30.
• Edema at the time of randomization (a participant who experiences edema during run-in must have recovered within 2 weeks and be edema free for 1 week prior to randomization).