Aims/hypothesis The aim of the study was to investigate ectopic fat deposition and insulin sensitivity, in a parallel single-blinded randomised controlled trial, comparing Paleolithic diet alone with the combination of Paleolithic diet and exercise in individuals with type 2 diabetes. Methods Thirty-two individuals with type 2 diabetes with BMI 25-40 kg/m 2 and 30-70 years of age followed a Paleolithic diet ad libitum for 12 weeks. In addition, study participants were randomised by computer program to either supervised combined exercise training (PD-EX group) or standard care exercise recommendations (PD group). Staff performing examinations and assessing outcomes were blinded to group assignment. Thirteen participants were analysed in each group: hepatic and peripheral insulin sensitivity were measured using the hyperinsulinaemic-euglycaemic clamp technique combined with [6, H 2 ]glucose infusion, and liver fat was assessed by proton magnetic resonance spectroscopy; both analyses were secondary endpoints. Intramyocellular lipid (IMCL) content was measured by magnetic resonance spectroscopy as a secondary analysis. All examinations were performed at Umeå University Hospital, Umeå, Sweden. Results Both study groups showed a median body weight loss of 7 kg. Fat mass decreased by 5.7 kg in the PD group and by 6.5 kg in the PD-EX group. Maximum oxygen uptake increased in the PD-EX group only. Liver fat showed a consistent reduction (74% decrease) in the PD group, while the response in the PD-EX group was heterogeneous (p < 0.05 for the difference between groups). IMCL content of the soleus muscle decreased by 40% in the PD group and by 22% in the PD-EX group (p < 0.05 for the difference between groups). Both groups improved their peripheral and adipose tissue insulin sensitivity, but not their hepatic insulin sensitivity. Plasma fetuin-A decreased by 11% in the PD group (p < 0.05) and remained unchanged in the PD-EX group. Liver fat changes during the intervention were correlated with changes in fetuin-A (r S = 0.63, p < 0.01). Participants did not report any important adverse events caused by the intervention. Conclusions/interpretation A Paleolithic diet reduced liver fat and IMCL content, while there was a tissue-specific heterogeneous response to added exercise training.