Objective To compare the effectiveness of a novel model of care ("Stepping Up") with usual primary care in normalising insulin initiation for type 2 diabetes, leading to improved glycated haemoglobin (HbA1c) levels.Design Cluster randomised controlled trial.Setting Primary care practices in Victoria, Australia, with a practice nurse and at least one consenting eligible patient (HbA1c ≥7.5% with maximal oral treatment).Participants 266 patients with type 2 diabetes and 74 practices (mean cluster size 4 (range 1-8) patients), followed up for 12 months.Intervention The Stepping Up model of care intervention involved theory based change in practice systems and reorientation of the roles of health professionals in the primary care diabetes team. The core components were an enhanced role for the practice nurse in leading insulin initiation and mentoring by a registered nurse with diabetes educator credentials.Main outcome measures The primary endpoint was change in HbA1c. Secondary endpoints included the proportion of participants who transitioned to insulin, proportion who achieved target HbA1c, and a change in depressive symptoms (patient health questionnaire, PHQ-9), diabetes specific distress (problem areas in diabetes scale, PAID), and generic health status (assessment of quality of life instrument, AQoL-8D).Results HbA1c improved in both arms, with a clinically significant between arm difference (mean difference -0.6%, 95% confidence interval -0.9% to -0.3%), favouring the intervention. At 12 months, in intervention practices, 105/151 (70%) of participants had started insulin, compared with 25/115 (22%) in control practices (odds ratio 8.3, 95% confidence interval 4.5 to 15.4, P<0.001). Target HbA1c (≤7% (53 mmol/mol)) was achieved by 54 (36%) intervention participants and 22 (19%) control participants (odds ratio 2.2, 1.2 to 4.3, P=0.02). Depressive symptoms did not worsen at 12 months (PHQ-9: -1.1 (3.5) v -0.1 (2.9), P=0.05). A statistically significant difference was found between arms in the mean change in mental health (AQoL mental component summary: 0.04 (SD 0.16) v -0.002 (0.13), mean difference 0.04 (95% confidence interval 0.002 to 0.08), P=0.04), favouring the intervention, but no significant difference in physical health (AQoL physical component summary: 0.03 (0.15) v 0.02 (0.13)) nor diabetes specific distress (5.6 (15.5) v -2.4 (15.4)). No severe hypoglycaemia events were reported.Conclusions The Stepping Up model of care was associated with increased insulin initiation rates in primary care, and improvements in glycated haemoglobin without worsening emotional wellbeing.Trial registration Australian and New Zealand Clinical Trials Registry ACTRN12612001028897.