OBJECTIVE: We investigated sex and racial differences in insulin sensitivity, β-cell function, and glycated hemoglobin (HbA1c) and the associations with selected phenotypic characteristics. RESEARCH DESIGN AND METHODS: This is a cross-sectional analysis of baseline data from 3,108 GRADE (Glycemia Reduction Approaches in Diabetes: A Comparative Effectiveness Study) participants. All had type 2 diabetes diagnosed <10 years earlier and were on metformin monotherapy. Insulin sensitivity and β-cell function were evaluated using the HOMA of insulin sensitivity and estimates from oral glucose tolerance tests, including the Matsuda Index, insulinogenic index, C-peptide index, and oral disposition index (DI). RESULTS: The cohort was 56.6 ± 10 years of age (mean ± SD), 63.8% male, with BMI 34.2 ± 6.7 kg/m2, HbA1c 7.5 ± 0.5%, and type 2 diabetes duration 4.0 ± 2.8 years. Women had higher DI than men but similar insulin sensitivity. DI was the highest in Black/African Americans, followed by American Indians/Alaska Natives, Asians, and Whites in descending order. Compared with Whites, American Indians/Alaska Natives had significantly higher HbA1c, but Black/African Americans and Asians had lower HbA1c. However, when adjusted for glucose levels, Black/African Americans had higher HbA1c than Whites. Insulin sensitivity correlated inversely with BMI, waist-to-hip ratio, triglyceride-to-HDL-cholesterol ratio (TG/HDL-C), and the presence of metabolic syndrome, whereas DI was associated directly with age and inversely with BMI, HbA1c, and TG/HDL-C. CONCLUSIONS: In the GRADE cohort, β-cell function differed by sex and race and was associated with the concurrent level of HbA1c. HbA1c also differed among the races, but not by sex. Age, BMI, and TG/HDL-C were associated with multiple measures of β-cell function and insulin sensitivity.