BACKGROUND: Bariatric surgery improves glycaemia in obese people with type 2 diabetes, but its effects are uncertain in overweight people with this disease. We aimed to identify whether laparoscopic adjustable gastric band surgery can improve glucose control in people with type 2 diabetes who were overweight but not obese. METHODS: We did an open-label, parallel-group, randomised controlled trial between Nov 1, 2009, and June 30, 2013, at one centre in Melbourne, Australia. Patients aged 18-65 years with type 2 diabetes and a BMI between 25 and 30 kg/m2 were randomly assigned (1:1), by computer-generated random sequence, to receive either multidisciplinary diabetes care plus laparoscopic adjustable gastric band surgery or multidisciplinary diabetes care alone. The primary outcome was diabetes remission 2 years after randomisation, defined as glucose concentrations of less than 7.0 mmol/L when fasting and less than 11.1 mmol/L 2 h after 75 g oral glucose, at least two days after stopping glucose-lowering drugs. Analysis was by intention to treat. This trial is registered with the Australian New Zealand Clinical Trials Registry, number ACTRN12609000286246. FINDINGS: 51 patients were randomised to the multidisciplinary care plus gastric band group (n=25) or the multidisciplinary care only group (n=26), of whom 23 participants and 25 participants, respectively, completed follow-up to 2 years. 12 (52%) participants in the multidisciplinary care plus gastric band group and two (8%) participants in the multidisciplinary care only group achieved diabetes remission (difference in proportions 0.44, 95% CI 0.17-0.71; p=0.0012). One (4%) participant in the gastric band group needed revisional surgery and four others (17%) had a total of five episodes of food intolerance due to excessive adjustment of the band. INTERPRETATION: When added to multidisciplinary care, laparoscopic adjustable gastric band surgery for overweight people with type 2 diabetes improves glycaemic control with an acceptable adverse event profile. Laparoscopic adjustable gastric band surgery is a reasonable treatment option for this population.