Professor Roy Taylor of Newcastle University says the diet causes fat levels in the pancreas to plummet, restoring normal function, The Daily Telegraph reported Friday.
Taylor asked 11 volunteers recently diagnosed with the condition to go on a diet of specially formulated drinks and non-starchy vegetables for eight weeks.
After just the first week the patients' pre-breakfast blood-sugar levels measured normal, suggesting correct pancreas function had been restored.
At the end of the eight weeks, all the study participants had managed to reverse their diabetes.
Taylor acknowledged that the extreme nature of the diet made him a little pessimistic about how many people could stick with it.
"Maybe 5 per cent," he said. "However, if they did, it would save the [National Health Service] many millions of pounds."