Elevated levels of non-esterified fatty acids (NEFA) play a role in insulin resistance, impaired beta-cell function and they are a denominator of the abnormal atherogenic lipid profile that characterizes obese patients with type 2 diabetes (T2DM). We hypothesized that the GLP-1 receptor agonist liraglutide, in combination with metformin, would reduce lipolysis. In a randomized, double-blind, placebo-controlled, cross-over trial, 41 T2DM patients with coronary artery disease were randomized and treated with liraglutide-metformin vs placebo-metformin during 12- + 12-week periods with a wash-out period of at least 2 weeks before and between the intervention periods. NEFA kinetics were estimated using the Boston Minimal Model of NEFA metabolism, with plasma NEFA and glucose levels measured during a standard 180-minute frequently sampled intravenous glucose tolerance test. Liraglutide-metformin reduced estimates of lipolysis. Furthermore, placebo-metformin increased estimates of lipid oxidation, while treatment with liraglutide eliminated this effect. We conclude that liraglutide exerts a clinically relevant reduction in estimates of lipolysis and lipid oxidation which is explained, in part, by improved insulin secretion, as revealed by an intravenous glucose tolerance test.