Newcastle University researchers found the low-calorie diet reduced fat levels in the pancreas and liver, which helped insulin production return to normal.
Seven out of 11 people studied were free of diabetes three months later, say findings published in the journal.
More research is needed to see whether the reversal is permanent, say experts.
Type 2 diabetes affects 2.5m people in the UK. It develops when not enough insulin is produced in the body or the insulin that is made by the body doesn’t work properly.
When this happens, glucose – a type of sugar – builds up in the blood instead of being broken down into energy or fuel which the body needs.
The 11 participants in the study were all diagnosed with Type 2 diabetes within the previous four years.
They cut their food intake drastically for two months, eating only liquid diet drinks and non-starchy vegetables.
After one week of the diet, researchers found that the pre-breakfast blood sugar levels of all participants had returned to normal.
MRI scans of their pancreases also revealed that the fat levels in the organ had decreased from around 8% – an elevated level – to a more normal 6%.
Three months after the end of the diet, when participants had returned to eating normally and received advice on healthy eating and portion size, most no longer suffered from the condition.
Professor Roy Taylor, director of Newcastle Magnetic Resonance Centre at Newcastle University and lead study author, said he was not suggesting that people should follow the diet.
“This diet was only used to test the hypothesis that if people lose substantial weight they will lose their diabetes.
“Although this study involved people diagnosed with diabetes within the last four years, there is potential for people with longer-standing diabetes to turn things around too.”
Dr Ee Lin Lim, also from Newcastle University’s research team, said that although dietary factors were already known to have an impact on Type 2 diabetes, the research showed that the disease did not have to be a life sentence.
“It’s easy to take a pill, but harder to change lifestyle for good. Asking people to shift weight does actually work,” she said.
However, not everyone in the study managed to stay free of diabetes.
“It all depends on how much individuals are susceptible to diabetes. We need to find out why some people are more susceptible than others, then target these obese people. We can’t know the reasons for that in this study,” Dr Lim said.
Professor Edwin Gale, a diabetes expert from the University of Bristol, said the study did not reveal anything new.
“We have known that starvation is a good cure for diabetes. If we introduced rationing tomorrow, then we could get rid of diabetes in this country.
“If you can catch people with diabetes in the early stages while beta cells are still functioning, then you can delay its onset for years, but you will get it sooner or later because it’s in the system.”
But Keith Frayn, professor of human metabolism at the University of Oxford, said the Newcastle study was important.
“People who lose large amounts of weight following surgery to alter their stomach size or the plumbing of their intestines often lose their diabetes and no longer need treatment.
“This study shows that a period of marked weight loss can produce the same reversal of Type 2 diabetes.
“It offers great hope for many people with diabetes, although it must be said that not everyone will find it possible to stick to the extremely low-calorie diet used in this study.”
Dr Iain Frame, director of research at Diabetes UK, which funded the study, said the diet was not an easy fix.
“Such a drastic diet should only be undertaken under medical supervision. Despite being a very small trial, we look forward to future results particularly to see whether the reversal would remain in the long term.”