Bile acids are synthesized in the liver from cholesterol and have traditionally been recognized for their role in absorption of lipids and in cholesterol homeostasis. In recent years, however, bile acids have emerged as metabolic signaling molecules that are involved in the regulation of lipid and glucose metabolism, and possibly energy homeostasis, through activation of the bile acid receptors farnesoid X receptor (FXR) and TGR5. Bile acid sequestrants (BASs) constitute a class of drugs that bind bile acids in the intestine to form a nonabsorbable complex resulting in interruption of the enterohepatic circulation. This increases bile acid synthesis and consequently reduces serum low-density lipoprotein cholesterol. Also, BASs improve glycemic control in patients with type 2 diabetes. Despite a growing understanding of the impact of BASs on glucose metabolism, the mechanisms behind their glucose-lowering effect in patients with type 2 diabetes remain unclear. This article offers a review of the mechanisms behind the glucose-lowering effect of BASs, and the efficacy of BASs in the treatment of type 2 diabetes.