Type 2 diabetes is associated with insulin resistance, impaired pancreatic β-cell insulin secretion, and nonalcoholic fatty liver disease. Tissue-specific SWELL1 ablation impairs insulin signaling in adipose, skeletal muscle, and endothelium, and impairs β-cell insulin secretion and glycemic control. Here, we show that I_Cl,SWELL and SWELL1 protein are reduced in adipose and β-cells in murine and human diabetes. Combining cryo-electron microscopy, molecular docking, medicinal chemistry, and functional studies, we define a structure activity relationship to rationally-design active derivatives of a SWELL1 channel inhibitor (DCPIB/SN-401), that bind the SWELL1 hexameric complex, restore SWELL1 protein, plasma membrane trafficking, signaling, glycemic control and islet insulin secretion via SWELL1-dependent mechanisms. In vivo, SN-401 restores glycemic control, reduces hepatic steatosis/injury, improves insulin-sensitivity and insulin secretion in murine diabetes. These findings demonstrate that SWELL1 channel modulators improve SWELL1-dependent systemic metabolism in Type 2 diabetes, representing a first-in-class therapeutic approach for diabetes and nonalcoholic fatty liver disease.