Islet autoimmunity may contribute to β-cell dysfunction in type 2 diabetes (T2D). Its prevalence and clinical significance have not been rigorously determined. In this ancillary study to the Glycemia Reduction Approaches in Diabetes-A Comparative Effectiveness (GRADE) Study, we investigated the prevalence of cellular and humoral islet autoimmunity in patients with T2D duration 4·0±3·0 y, HbA1c 7·5±0·5% on metformin alone. We measured T cell autoreactivity against islet proteins, islet autoantibodies against GAD65, IA2, ZnT8, and β-cell function. Cellular islet autoimmunity was present in 41·3%, humoral islet autoimmunity in 13·5%, and both in 5·3%. β-cell function calculated as iAUC-CG and ΔC-peptide(0- 30)/Δglucose(0-30) from an oral glucose tolerance test was lower among T cell-positives (T+) than T cell-negatives (T-) using two different adjustments for insulin sensitivity (iAUC-CG: 13·2% [95% CI 0·3, 24·4%] or 11·4% [95% CI 0·4, 21·2%] lower; ΔC-peptide(0-30)/Δglucose(0-30)) 19% [95% CI 3·1, 32·3%] or 17·7% [95% CI 2·6, 30·5%] lower). T+ patients had 17% higher HbA1c (95% CI 0·07, 0·28) and 7·7 mg/dL higher fasting plasma glucose levels (95% CI 0·2,15·3) than T- patients. We conclude that islet autoimmunity is much more prevalent in T2D patients than previously reported. T cell-mediated autoimmunity is associated with diminished β-cell function and worse glycemic control.