Abstract Context Dapagliflozin and other SGLT2 inhibitors are known to increase hematocrit, possibly due to its diuretic effects and hemoconcentration. Objective Since type 2 diabetes is a proinflammatory state and since hepcidin, a known suppressor of erythropoiesis, is increased in proinflammatory states, we investigated the possibility that dapagliflozin suppresses hepcidin concentrations and thus increases erythropoiesis. Design Prospective, randomized, and placebo-controlled study. Setting Single endocrinology center. Patients Fifty-two obese type 2 diabetes patients. Intervention Patients were randomized (1:1) to either dapagliflozin (10 mg daily) or placebo for 12 weeks. Blood samples were collected before and after treatments and serum, plasma, and mononuclear cells (MNC) were prepared. Main Outcome Measure Hepcidin and other hematopoietic factors. Results Following dapagliflozin treatment, there was a significant fall in HbA1c and a significant increase in hemoglobin concentration and hematocrit. Dapagliflozin treatment significantly reduced circulating hepcidin and ferritin concentrations while causing a significant increase in levels of the hepcidin inhibitor, erythroferrone, and a transient increase in erythropoietin. Additionally, dapagliflozin increased plasma transferrin levels and expression of transferrin receptors 1 and 2 in MNC, while there was no change in the expression of the iron cellular transporter, ferroportin. Dapagliflozin treatment also caused a decrease in hypoxia-induced factor-1α expression in MNC while it increased the expression of its inhibitor, prolyl hydroxylase-2. There were no significant changes in any of these indices in the placebo group. Conclusions We conclude that dapagliflozin increases erythropoiesis and hematocrit through mechanisms that involve the suppression of hepcidin and the modulation of other iron regulatory proteins.