This multicenter, randomized, double-blind, placebo-controlled study will evaluate the efficacy, safety and tolerability of aleglitazar monotherapy in patients with Type 2 diabetes mellitus who are drug-naïve to anti-hyperglycemic therapy. Patients will be randomized to receive either aleglitazar 150 mcg orally daily or placebo for 26 weeks.

Inclusion Criteria:

• Adult patient, >/= 18 years of age
• Diagnosis of Type 2 diabetes mellitus within 12 months prior to screening
• Drug-naïve (defined as no anti-hyperglycemic medication for at least 12 weeks prior to screening and for not longer than 3 consecutive months at any time in the past)
• HbA1c >/= 7% and </= 9.5% at screening or within 4 weeks prior to screening and at pre-randomization visit
• Fasting plasma glucose </= 13.3 mmol/L (</= 240 mg/dL) at pre-randomization visit
• Agreement to maintain diet and exercise habits implemented during the run-in phase during the full course of the study

Exclusion Criteria:

• Pregnant women, women intending to become pregnant during the study period, currently lactating women, or women of child-bearing potential not using highly effective, medically approved birth control methods

• Diagnosis or history of:

  1. Type 1 diabetes mellitus, diabetes resulting from pancreatic injury, or secondary forms of diabetes
  2. Acute metabolic diabetic complications such as ketoacidosis or hyperosmolar coma within the past 6 months

• Any previous treatment with thiazolidinedione or with a dual peroxisome proliferator activated receptor (PPAR) agonist

• Any body weight lowering or lipoprotein-modifying therapy (e.g. fibrates) within 12 weeks prior to screening with the exception of stable (>= 1 month) statin therapy

• Prior intolerance to fibrate

• Triglycerides (fasting) > 4.5 mmol/L (> 400 mg/dL) at screening or within 4 weeks prior to screening

• Clinically apparent liver disease

• Anemia at or within 4 weeks prior to screening

• Inadequate renal function

• Symptomatic congestive heart failure New York Heart Association (NYHA) Class II-IV at screening

• Myocardial infarction, acute coronary syndrome or transient ischemic attack/stroke within 6 months prior to screening visit

• Known macular edema at screening or prior to screening visit

• Diagnosed and/or treated malignancy (except for basal cell skin cancer, in situ carcinoma of the cervix, or in situ prostate cancer) within the past 5 years

• Uncontrolled hypertension

• History of active substance abuse (including alcohol) within the past 2 years