Yes, physical activity both prevents and treats Type 2 diabetes.
Eriksson, K.; Lindgärde, F.
Prevention of Type 2 (non-insulin-dependent) diabetes mellitus by diet and physical exercise The 6-year Malmö feasibility study
Diabetologia Volume: 34; Issue: 12; 1991-12-01
We conclude that long-term intervention in the form of diet and physical exercise is feasible even on a large scale, and that substantial metabolic improvement can be achieved which may contribute to prevent or postpone manifest diabetes.
Helmrich, Susan P.; Ragland, David R.; Leung, Rita W.; Paffenbarger, Ralph S.
Physical Activity and Reduced Occurrence of Non-Insulin-Dependent Diabetes Mellitus
New England Journal of Medicine; 1991/07/18
Increased physical activity is effective in preventing NIDDM, and the protective benefit is especially pronounced in persons at the highest risk for the disease.
Ronald J. Sigal; Glen P. Kenny; David H. Wasserman; Carmen Castaneda-Sceppa; Russell D. White
Physical Activity/Exercise and Type 2 Diabetes A consensus statement from the American Diabetes Association
Diabetes Care June 2006 vol. 29 no. 6 1433-1438
Therefore, there is firm and consistent evidence that programs of increased physical activity and modest weight loss reduce the incidence of type 2 diabetes in individuals with [impaired glucose tolerance].
Therefore, structured exercise programs had a statistically and clinically significant beneficial effect on glycemic control, and this effect was not primarily mediated by weight loss.