Data regarding atherogenic dyslipidemia and the inflammation profile in youth with type 2 diabetes is limited and the effect of insulin therapy on these variables has not previously been studied in youth. We determined the impact of insulin therapy on lipid and inflammatory markers in youth with poorly controlled type 2 diabetes. In the Treatment Options for type 2 Diabetes in Adolescents and Youth (TODAY) multicenter trial, 285 participants failed to sustain glycemic control on randomized treatment (primary outcome, glycated hemoglobin A1c HbA1c at ≥8% for 6 months); 363 maintained glycemic control (never reached primary outcome). Statins were used for a low-density lipoprotein cholesterol of ≥130 mg/dL. Upon reaching the primary outcome, insulin was started. Changes in lipids and inflammatory markers (slopes over time) were examined. Progression of dyslipidemia was related to glycemic control. In those with the primary outcome, insulin therapy impacted HbA1c modestly, and dampened the increase in total cholesterol, low-density lipoprotein cholesterol, and total apolipoprotein B, although statin use increased from 8.6% to 22% year after the primary outcome. The increase in triglycerides and plasma nonesterified fatty acids stabilized after insulin was started, independent of HbA1c. There was an increase in high-sensitivity C-reactive protein that continued after insulin initiation, related to HbA1c and percent overweight. Worsening dyslipidemia and inflammation over time raise concern regarding premature development of atherosclerosis in youth with type 2 diabetes. Insulin therapy has a limited benefit in the absence of glycemic control. Strategies to achieve better glycemic control are needed. ClinicalTrials.gov: NCT00081328.