© 2020 The Author(s). Background: Insulin resistance and accumulation of visceral adipose tissue (VAT) and intermuscular adipose tissue (IMAT) place aging adults with obesity at high risk of cardio-metabolic disease. A very low carbohydrate diet (VLCD) may be a means of promoting fat loss from the visceral cavity and skeletal muscle, without compromising lean mass, and improve insulin sensitivity in aging adults with obesity. Objective: To determine if a VLCD promotes a greater loss of fat (total, visceral and intermuscular), preserves lean mass, and improves insulin sensitivity compared to a standard CHO-based/low-fat diet (LFD) in older adults with obesity. Design: Thirty-four men and women aged 60-75 years with obesity (body mass index [BMI] 30-40 kg/m2) were randomized to a diet prescription of either a VLCD (< 10:25:> 65% energy from CHO:protein:fat) or LFD diet (55:25:20) for 8 weeks. Body composition by dual-energy X-ray absorptiometry (DXA), fat distribution by magnetic resonance imaging (MRI), insulin sensitivity by euglycemic hyperinsulinemic clamp, and lipids by a fasting blood draw were assessed at baseline and after the intervention. Results: Participants lost an average of 9.7 and 2.0% in total fat following the VLCD and LFD, respectively (p < 0.01). The VLCD group experienced ~ 3-fold greater loss in VAT compared to the LFD group (- 22.8% vs - 1.0%, p < 0.001) and a greater decrease in thigh-IMAT (- 24.4% vs - 1.0%, p < 0.01). The VLCD group also had significantly greater thigh skeletal muscle (SM) at 8 weeks following adjustment for change in total fat mass. Finally, the VLCD had greater increases in insulin sensitivity and HDL-C and decreases in fasting insulin and triglycerides compared to the LFD group. Conclusions: Weight loss resulting from consumption of a diet lower in CHO and higher in fat may be beneficial for older adults with obesity by depleting adipose tissue depots most strongly implicated in poor metabolic and functional outcomes and by improving insulin sensitivity and the lipid profile. Trial registration: NCT02760641. Registered 03 May 2016 - Retrospectively registered.