Diabetes mellitus frequently complicates cirrhosis but the pathogenic mechanisms are unknown. To assess the contribution of reduced insulin action and secretion, 24 cirrhotic‐diabetic patients waiting for liver transplant because of an unresectable hepatocarcinoma underwent an oral glucose tolerance test (OGTT) to assess the β‐cell function and an insulin clamp combined with 3‐3Hglucose infusion to measure whole body glucose metabolism before and 2 years after the transplant. Seven cirrhotic nondiabetic patients, 11 patients with chronic uveitis on similar immunosuppressive therapy, and 7 healthy subjects served as control groups. Cirrhotic patients showed a profound insulin resistance, and diabetics in addition also showed increased endogenous glucose production (P < .05) and insulin deficiency during the OGTT (P < .05). Liver transplantation normalized endogenous glucose production and insulin sensitivity but failed to cure diabetes in 8 of the 24 patients because a markedly low insulin response during the OGTT. Age, body mass index, family history of diabetes, immunosuppressive drugs, and pathogenesis of cirrhosis did not predict in whom liver transplant was going to cure diabetes. On the contrary, a reduced secretory response characterized the patients in whom the transplant would not be curative. In summary, insulin resistance was a primary event complicating cirrhosis but additional β‐cell secretory defects were crucial for development of diabetes. Liver transplantation, lessening insulin resistance, cured hepatogenous diabetes in 67% of cirrhotic‐diabetic patients; nevertheless 33% were still diabetics because the persistence of a reduced β‐cell function, which makes these patients eventually eligible for combined islet transplantation.