This study evaluated the effect of 24-week Taichi training and Taichi plus resistance band training on pulmonary diffusion capacity and glycemic control in patients with Type 2 diabetes mellitus (T2DM). Forty-eight patients with T2DM were randomly divided into three groups: Group A—Taichi training: practiced Taichi 60 min/day, 6 days/week for 24 weeks; Group B—Taichi plus resistance band training: practiced 60-min Taichi 4 days/week plus 60-min resistance band training 2 days/week for 24 weeks; and Group C–controls: maintaining their daily lifestyles. Stepwise multiple regression analysis was applied to predict diffusion capacity of the lungs for carbon monoxide (DLCO) by fasting blood glucose, insulin, glycosylated hemoglobin (HbA1c), tumour necrosis factor alpha (TNF-α), von Willebrand Factor (vWF), interleukin-6 (IL-6), intercellular adhesion molecule 1 (ICAM-1), endothelial nitric oxide synthase (eNOS), nitric oxide (NO), endothelin-1 (ET-1), vascular endothelial growth factor, and prostaglandin I-2. Taichi with or without resistance band training significantly improved DLCO, increased insulin sensitivity, eNOS and NO, and reduced fasting blood glucose, insulin, HbA1c, TNF-α, vWF, IL-6, ICAM-1, and ET-1. There was no change in any of these variables in the control group. DLCO was significantly predicted (R2 = 0.82) by insulin sensitivity (standard-β = 0.415, P<0.001), eNOS (standard-β = 0.128, P = 0.017), TNF-α (standard-β = -0.259, P = 0.001), vWF (standard-β = -0.201, P = 0.007), and IL-6 (standard-β = -0.175, P = 0.032) in patients with T2DM. The impact of insulin sensitivity was the most important predictor for the variation of DLCO based on the multiple regression modeling. This study demonstrates that 24-week Taichi training and Taichi plus resistance band training effectively improve pulmonary diffusion capacity and blood glycemic control in patients with T2DM. Variation of DLCO is explained by improved insulin sensitivity and endothelial function, and reduced inflammatory markers, including TNF-α, vWF, and IL-6.