A study to compare Human Inhalation Powder (also known as AIR® Inhaled Insulin) (AIR® is a registered trademark of Alkermes, Inc.)with insulin glargine injections in patients with Type 2 diabetes who are currently taking oral medications and have not previously taken insulin. Change in HbA1c levels will be reviewed to determine superiority or inferiority of the AIR Inhaled Insulin regimen.

Inclusion Criteria:

• Type 2 Diabetes Mellitus
• Insulin naive
• One or more oral antihyperglycemic medications
• HbA1c greater than or equal to 8.0% and less than or equal to 10.5%
• Non-smoker

Exclusion Criteria:

• Taking a TZD dose greater than what is indicated
• Have not taken insulin within 6 months of entry into study
• Have had more than 2 episodes of sever hypoglycemia during the 6 months prior to study entry
• Have had more than 1 hospitalization or emergency room visit due to poor diabetic control during the 6 months prior to study entry
• Have had pneumonia in the 3 months prior to study entry
• Systemic glucocorticoid therapy
• Clinical signs or symptoms of liver disease, acute or chronic hepatitis
• History of renal transplantation
• Have an active or untreated malignancy
• Have a current diagnosis or past history of clinically relevant pulmonary disease
• Taking or have taken exenatide during the 6 weeks prior to study entry