Weight loss is effective in reducing many complications of obesity, with the majority of patients who undergo bariatric surgery having substantial improvements in their weight-related illnesses. The investigators propose a pilot study in 45 subjects with mild to moderate obesity to compare how losing 10% of initial body weight via one of three common weight loss strategies (medical weight loss with a low calorie diet, Roux-en-Y gastric bypass surgery, and adjustable gastric banding) affects diabetes. While the investigators do not expect this pilot study to provide definitive answers, it will provide valuable information to design a larger trial which will help guide therapy for people with mild-moderate obesity and substantial comorbidities.

Inclusion Criteria:

• BMI 30-40 kg/m2 at screening visit 1
• Age 21-64 years
• Insured by collaborating insurance plan (Employee Health Plan)
• Type 2 Diabetes
• Medically safe to undergo surgery and approved by a psychologist
• Able to exercise at a moderate level
• Able to give informed consent
• Willing to accept randomization to each group
• Able to communicate (both written and oral) in English
• Willing to use reliable method of birth control during study and ≥18 months postop (if applicable)

Exclusion Criteria:

• Prior bariatric surgery
• Prior gastric, small or large bowel, spleen, pancreas, kidney, or liver surgery, including large ventral hernia or previous large ventral hernia repair.
• Weight loss of ≥ 5% of body weight in the past 6 months
• Uncontrolled diabetes (HbA1c>8.5%)
• Untreated severe diabetic retinopathy
• Use of thiazolidinediones or insulin currently or within the past 3 months
• Uncontrolled blood pressure (>160/100 -may be rescreened)
• Estimated glomerular filtration rate (GFR)<30
• Malignancy (except squamous or basal cell of the skin) in the past 5 years
• MI, stroke or cardiovascular procedure within 12 months
• Known HIV positive or use of anti-HIV therapy (HAART)
• Unstable angina
• Significant pulmonary disease with oxygen dependency
• Chronic use (including in the past 6 months) of medications likely to cause weight gain or prevent weight loss (e.g. corticosteroids, lithium)
• Use of prescription weight loss medication or over-the-counter orlistat in the past 6 months
• Other serious medical condition likely to hinder accurate measurement of weight, or for which weight loss is contraindicated, or which would cause weight loss
• History of severe depression requiring hospitalization in the past 12 months
• Severe mental illness including bipolar disorder, schizophrenia or other psychotic disorders
• Current bulimia nervosa
• Unable or unwilling to use meal replacement products
• Consumption of >14 alcoholic drinks/week or > 5 drinks on more than 2 occasions in the past 12 months
• Use of illicit substances in the past 12 months
• Cigarette or cigar smoking in the past 2 months
• Pregnant or nursing within past 6 months
• Plans to become pregnant within 2 years
• Plans to relocate from the area within 1 year
• Another member of household is a study participant or staff in the trial