African-American subjects often present with hyperglycemic crisis (diabetic ketoacidosis or severe hyperglycemia), yet subsequently are treated without insulin. The pathophysiology of this unique condition is unknown. We hypothesized that recovery from atypical diabetes with intensive insulin therapy resulted from a reversal of a defect in beta-cell function and improved insulin sensitivity. We studied eight newly diagnosed, antibody-negative African-American subjects (age, 34-56 yr) who presented with hyperglycemic crisis. Subjects were studied at baseline after overnight glycemic control and again after 3 wk and 3 months of intensive insulin therapy. Insulin sensitivity (SI) was determined from an insulin-modified, frequently sampled i.v. glucose tolerance test, and insulin secretion was measured as the acute insulin response to glucose and to a glucagon stimulation test. Fructosamine and hemoglobin A1c declined significantly with intensive insulin therapy, and insulin requirements decreased over time. Both acute insulin response to glucose and the C peptide response to glucagon stimulation test improved by 3 wk (P = 0.02 vs. baseline), and improvements were maintained at 3 months (P = 0.02 vs. baseline). In contrast, the SI remained low throughout the study. We demonstrate that improved glycemic control correlates with a remarkable recovery of beta-cell function, but no change in SI.