Inclusion Criteria:

• Males with age 35-75 years inclusive.
• Evidence of hypogonadism: Hypogonadism will be defined as low total testosterone (<300 ng/dL) and low calculated free testosterone (below 6.5ng/dL; calculated using testosterone and SHBG). Testosterone levels will be measured between 8 and 10 am. Subjects who have normal total but low free testosterone levels (or vice versa) will be asked to come again after one week to have their testosterone levels re-measured. They will be included in the study in their free and total testosterone levels are low on re-measurement.
• Type 2 diabetes
• Hemoglobin A1c <8.0 %
• Subjects on medications for diabetes will be allowed as long as they are on stable doses of these compounds for at least 6 weeks. The dose of thiazolidinediones will have to be stable for 3 months prior to the study. The dosage of diabetic medications will not be changed during the study.

Exclusion Criteria:

• Coronary event or procedure (myocardial infarction, unstable angina, coronary artery bypass, surgery or coronary angioplasty) in the previous four weeks
• Hepatic disease (transaminase > 3 times normal)
• Renal impairment (serum creatinine > 1.5)
• Chronic steroid therapy
• Use of testosterone or other androgens (such as DHEA) in the last 3 months
• Panhypopituitarism
• HIV or hepatitis C
• Subjects will be excluded from the study for history of prostate or breast cancer, gonadal endocrine disorders
• Current or recent history of major psychiatric illness, significant uncontrolled systemic illness
• Sleep apnea
• History of alcoholism or substance abuse within the past year
• History of taking other drugs that might interfere with the results of the study (ie, Lupron, finasteride, spironolactone, cimetidine, antiandrogens, estrogens, p450 enzyme inducers, barbiturates)
• Abnormal prostate evidenced by prostatic symptoms, prostatic masses or induration on rectal examination, elevated levels of prostate specific antigen (>4 ng/mL; subjects with PSA levels between 2.5-4 ng/mL will be permitted if prostate biopsy is negative) or positive biopsy, a urine flow rate of less than 12 mL/s, or an International Prostate Symptom Score greater than 19
• Hematocrit greater than 50%
• Body weight >300 lbs (this is the maximum weight that can be accommodated on DEXA or MRI machines.
• The subject has systolic blood pressure >170mmHg or diastolic blood pressure >100 mmHg while on or off anti-hypertensive treatment.
• Generalized skin disease that could affect the absorption of testosterone gel (ie, psoriasis);
• Morning prolactin level greater than 40 mg/mL
• Subjects with serum fasting triglyceride concentration > 500 mg/dL at screening or with history of hypertriglyceridemia-induced pancreatitis.
• Participation in any other concurrent clinical trial
• Any other life-threatening, non-cardiac disease
• Use of an investigational agent or therapeutic regimen within 30 days or 5 half-lives (which ever is longer) preceding the first dose of study medication.