Background:Type 2 diabetes is a chronic metabolic disorder characterized by high levels of blood sugar (glucose), insulin resistance, and relative insulin deficiency. The present study was conducted to assess the effect of rosiglitazone in type 2 diabetes with normal and abnormal liver function. Materials & Methods:96 type 2 diabetes subjects of both genderswere divided into two groups. Group I were those with both normal serum aspartate aminotransferase and group II were subjects with either elevated serum ALT (>40 U/L) or AST (>40 U/L) level. Parameters such as fasting plasma glucose (FPG), triglyceride (TG) and total cholesterol (TC), serum high-density lipoprotein cholesterol (HDL-C) and low-density lipoprotein cholesterol (LDL-C), serum levels of both AST and ALT and hemoglobin A1c (HbA1c) was evaluated. Results: group I had 28 males and 20 females and group II had 22 males and 26 females. In group I and group II, at baseline the mean BMI (Kg/m2) was 25.2and 27.9, FPG (mmol/l) was 12.5 and 10.9, TC (mmol/l) was 5.2 and 5.4, mean HDL- C (mmol/l) was 1.5 and 1.3, TG (mmol/l) was 2.6 and 2.4, AST (U/L) was 23.7 and 54.2, ALT (U/L)was 20.3 and 65.8 and HbA1C (%) was 8.6, and 8.4 respectively. The difference was significant (P< 0.05). In group I and group II, the mean BMI (Kg/m2) at 3 months was 25.0 and 27.2, FPG (mmol/l) was 11.5 and 10.1, TC (mmol/l) was 5.1 and 5.2, mean HDL- C (mmol/l) was 1.3 and 1.1, TG (mmol/l) was 2.2 and 2.1, AST (U/L) was 22.6 and 45.7, ALT (U/L) was 20.1 and 62.2 and HbA1C (%) was 8.2, and 8.0 respectively. The difference was significant (P< 0.05). Conclusion: A significant improvements in the levels of ALT and AST were noted in this trial following a 3-month course of rosiglitazone medication in patients with type 2 diabetes who had elevated liver enzymes.