Gastric bypass surgery leads to marked improvements in glucose tolerance and insulin sensitivity in obese type 2 diabetes (T2D); the impact on glucose fluxes in response to a physiological stimulus, such as a mixed meal test (MTT), has not been determined. We administered an MTT to 12 obese T2D patients and 15 obese nondiabetic (ND) subjects before and 1 year after surgery (10 T2D and 11 ND) using the double-tracer technique and modeling of β-cell function. In both groups postsurgery, tracer-derived appearance of oral glucose was biphasic, a rapid increase followed by a sharp drop, a pattern that was mirrored by postprandial glucose levels and insulin secretion. In diabetic patients, surgery lowered fasting and postprandial glucose levels, peripheral insulin sensitivity increased in proportion to weight loss (~30%), and β-cell glucose sensitivity doubled but did not normalize (compared with 21 nonsurgical obese and lean controls). Endogenous glucose production, however, was less suppressed during the MMT as the combined result of a relative hyperglucagonemia and the rapid fall in plasma glucose and insulin levels. We conclude that in T2D, bypass surgery changes the postprandial response to a dumping-like pattern and improves glucose tolerance, β-cell function, and peripheral insulin sensitivity but worsens endogenous glucose output in response to a physiological stimulus.