Background and objectives: Nonalcoholic fatty liver disease (NAFLD) and type 2 diabetes mellitus (T2DM) have become public health problems in the pediatric population. However, the relationship between these two conditions is not well understood. The primary objective of this study was to assess whether treatment of hyperglycemia in obese, treatment-naive children with type 2 diabetes (T2DM) was associated with an improvement of surrogate markers of NAFLD. Materials and methods: This retrospective, longitudinal study included 151 obese children with a diagnosis of T2DM (Age: 14 ± 1 years, 72% female children, BMI: 98.6th percentile, and A1c: 10.3 ± 0.2%). Clinical/demographic information was collected before patients started any diabetes treatment and 1 and 3 years after starting metformin and/or insulin therapy. Results: Forty-eight patients (32%) had abnormal ALT/AST (i.e., >40 U/L), suggestive of NAFLD. After 1 year of therapy, there were no significant differences in plasma ALT among patients started on insulin, metformin, or combination: 5±4 vs. −10 ± 3 vs. −2±2 IU/L, respectively, P = .07. Of note, changes in plasma ALT were small, despite a significant reduction of A1c in patients prescribed insulin (alone or with metformin): -2.8 ± 1.0%, P = .01, and −2.7 ± 0.3%, P < .001, respectively. In line with this, no significant correlations were found between changes in A1c and plasma aminotransferases. In contrast, changes in plasma AST/ALT were more strongly associated with BMI changes (r = 0.32, P < .001, and r = 0.19, P = .04, respectively). Similar results were observed after 3 years of follow-up. Conclusions: Nonalcoholic fatty liver disease is highly prevalent in obese children with T2DM. Treatment of hyperglycemia with metformin and/or insulin did not result in any significant improvement in surrogate markers of NAFLD (i.e., plasma aminotransferases). While changes in ALT and/or AST may not perfectly reflect histological changes in NAFLD, our findings suggest that the treatment of hyperglycemia per se may not be associated with NAFLD improvement.