To assess the effectiveness of the management of type 2 diabetes in an urban Australian setting. The Fremantle Diabetes Study (FDS), a community-based longitudinal observational study. 531 FDS participants with type 2 diabetes, with mean age, 62.4 years (95% CI, 40.9-79.3 years), 54% male, median diabetes duration 3.0 years (interquartile range [IQR], 0.7-7.0 years), with valid data from the baseline FDS assessment and five subsequent annual reviews between 1993 and 2001. Glycated haemoglobin (HbA(1c)) levels at annual review visits before and after change in blood glucose-lowering therapy. Over 2893 patient-years of follow-up, 97 patients (18%) progressed from dietary management to therapy with oral hypoglycaemic agents (OHA), and 45 (9%) progressed from OHA to insulin therapy, after a median duration of diabetes of 4.0 years (IQR, 2.9-5.5 years) and 8.1 years (IQR, 5.5-13.0 years), respectively. Median HbA(1c) concentrations (IQR) at the review before OHA or insulin were started were 7.7% (6.9%-8.8%) and 9.4% (8.0%-10.7%), respectively. At the next annual review, HbA(1c) levels in the two groups had fallen to 7.4% (6.5%-8.1%) and 7.9% (7.2%-9.5%), respectively (P < or = 0.001). Intensification of therapy was associated with beneficial changes in serum lipid profiles, but not with an increase in frequency of hypoglycaemia. Most Australian patients with type 2 diabetes may be spending most of the duration of their disease with suboptimal glycaemic control (HbA(1c) > 7.0%), despite the availability of a range of effective therapies, including insulin.