Technical Abstract: Lifestyle interventions causing weight loss or improved physical fitness in obese individuals may lead to improved physical function. This study involved participants in the Action for Health in Diabetes (Look AHEAD) trial who reported knee pain at baseline (n = 2,203). The purposes of this study were to determine whether an Intensive Lifestyle Intervention (ILI) group had improved self-reported physical function from baseline to 12 months vs. a Diabetes Support and Education (DSE) group, and if changes in weight or fitness were the cause. Outcome measures included the Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC) pain, stiffness, and physical function subscales, and WOMAC summary score. ILI participants exhibited greater adjusted mean weight loss vs. DSE ILI participants also demonstrated more favorable change in WOMAC summary scores vs. DSE participants. Weight loss was a mediator of the effect of the ILI intervention on change in WOMAC pain, function, and summary scores (P < 0.001). Increased fitness also mediated the effect of the ILI intervention upon WOMAC summary score. The ILI condition resulted in significant improvement in physical function among overweight and obese adults with diabetes and knee pain. The ILI condition also resulted in significant weight loss and improved fitness, which are possible mechanisms through which the ILI condition improved physical function.