Introduction: The association between Non-alcoholic fatty liver disease (NAFLD) and type 2 diabetes mellitus (T2DM) has been well established, Newer class of drugs like saroglitazar could be a potential therapeutic option for treating NAFLD and NASH associated with metabolic syndrome. Aim: To compare metformin vs saroglitazar on glycemic control and lipid parameters alongwith evaluation of its efficacy and safety levels in the newly diagnosedT2DM and prediabetic patients with NAFLD. Material and Methods: The study comprised of 100 patients of either sex in the age group of 30 to 70 years with NAFLD with newly diagnosed T2DM and prediabetes. They were divided randomly into two groups A and B comprising of 50 patients each. Group A comprised of the patients who received metformin (0.5-3gm) OD/divided dose a day orally for 24 weeks. Group B comprised of patients who received saroglitazar (4 mg) once a day orally for 24 weeks. Basic parameters consisting of lipid profile including total serum cholesterol, serum triglyceride, HDL, LDL and VLDL; HbA1c ,FBS; B.Urea, S.Creatinine; SGOT,SGPT,USG for fatty liver grading levels were repeated at 12 weeks and 24 weeks from baseline. The assays were carried out using A25 biosystem analyser. Results: There was a significant decrease in HbA1c level and FBS in both the groups. But it was marginally more in the group B as compared to group A. Both drugs saroglitazar and metformin show significant reduction in serum triglycerides, serum cholesterol, LDL and VLDL at 12 and 24 weeks treatment. The reduction in serum triglycerides, serum cholesterol and VLDL was more with saroglitazar as compared to metformin except LDL reduction, which was marginally more with metformin but it was found to be statistically non-significant. No significant side-effects were observed in the study population. Conclusion: From the study, it was concluded that saroglitazar was more efficacious drug than metformin in patients of NAFLD with newly diagnosed T2DM and pre-diabetes in terms of improvement in fatty liver grading on the basis of USG. Both the drugs were efficacious in term of improving glycemic and lipid parameters. Key words: Non-alcoholic fatty liver disease, type 2 diabetes mellitus, lipid profile, saroglitazar, metformin