Peripheral insulin action and cellular insulin binding were studied in 10 newly detected, obese, black, Southern African women with Type 2 diabetes mellitus before and after midterm oral sulphonylurea therapy and in five obese, non‐diabetic controls. Glucose disposal (assessed by the euglycaemic insulin clamp technique) was significantly reduced in diabetic patients compared to control subjects (4.4 ± 0.5 vs 6.4 ± 0.5 mg kg ‐1 min ‐1 , p < 0.05), and increased after 1 and 3 months of sulphonylurea therapy to 6.8 ± 0.6 mg kg ‐1 min ‐1 ( p = 0.01) and 6.3 ± 0.7 mg kg ‐1 min ‐1 ( p = 0.04), respectively. The major change in the binding kinetics of insulin to peripheral monocytes was an increase in the mean receptor concentration in the diabetic patients which was significant after 3 months of therapy (0.2 ± 0.08 to 0.6 ± 0.01 nM, p = 0.05). The basal plasma C‐peptide concentration was significantly lower in the diabetic patients than in the controls and remained so following sulphonylurea therapy, despite significant reductions in fasting glucose and HbA ‐1 concentrations. We conclude that newly diagnosed, obese, black Southern Africans with Type 2 diabetes showed diminished peripheral glucose disposal which increased following sulphonylurea therapy. This was accompanied by an increase in insulin receptor concentration but not with changes in basal insulin secretion.