The research team led by Professor Henry Buchwald of the Department of Surgery at the University of Minnesota, Minneapolis, observed almost 135,000 patients for the study.
The findings concluded that 78 per cent patients had a "complete resolution" of diabetes for up to two years post-surgery, while 87 either saw resolution or noted an improvement in their condition, reports Timesonline.
Type 2 diabetes is common to obese people and occurs when the body stops producing or using insulin, the hormone that maintains the sugar level in blood.
Losing weight can help the body to efficiently use available insulin, and thus prevent kidney failure, nerve damage and eye problems.
The weight-loss surgery, medically known as the bariatric surgery, or the gastric-band operation, fits a band around the upper part of the stomach, restricting the amount people can eat before feeling full. Though the operation can benefit diabetes patients, it is advised only for the very obese, who've failed to lose weight otherwise.
But charity Diabetes UK is a little sceptical about the findings of the research.
Zoë Harrison, care adviser for the charity, said: "Although the data shows good results from bariatric surgery, it must be remembered that any surgery carries serious risks.
"Bariatric surgery should be considered only as a last resort. It can lead to dramatic weight loss, which in turn may result in a reduction in people taking their type 2 diabetes medication, and even in some people needing no medication at all. This does not mean type 2 diabetes has been cured.
"These people will still need to eat a healthy, balanced diet and be physically active to manage their diabetes."