Impaired glucose tolerance (IGT) is a prediabetic state fueling the rising prevalence of type 2 diabetes mellitus (T2DM) in adolescents with marked obesity. Given the importance of insulin resistance, the poor β-cell compensation and the altered fat partitioning as underlying defects associated with this condition, it is crucial to determine the extent to which these underlying abnormalities can be reversed in obese adolescents. We tested, in a pilot study, whether rosiglitazone (ROSI) restores normal glucose tolerance (NGT) in obese adolescents with IGT by improving insulin sensitivity and β-cell function. In a small randomized, double-blind, placebo (PLA)-controlled study, lasting 4 months, 21 obese adolescents with IGT received either ROSI (8 mg daily) (n = 12, 5M/7F, BMI z-score 2.44 ± 0.11) or PLA (n = 9, 4M/5F, BMI z-score 2.41 ± 0.09). Before and after treatment, all subjects underwent oral glucose tolerance test (OGTT), hyperinsulinemic-euglycemic clamp, magnetic resonance imaging, and (1)H NMR assessment. After ROSI treatment, 58% of the subjects converted to NGT compared to 44% in the PLA group (P = 0.528). Restoration of NGT was associated with a significant increase in insulin sensitivity (P < 0.04) and a doubling in the disposition index (DI) (P < 0.04), whereas in the PLA group, these changes were not significant. The short-term use of ROSI appears to be safe in obese adolescents with IGT. ROSI restores NGT by increasing peripheral insulin sensitivity and β-cell function, two principal pathophysiological abnormalities of IGT.