GPR40, one of the G protein-coupled receptors predominantly expressed in pancreatic β-cells, mediates enhancement of glucose-stimulated insulin secretion by free fatty acids. A potent and selective GPR40 agonist is theorized to be a safe and effective antidiabetic drug with little or no risk of hypoglycemia. Cyclization of the phenylpropanoic acid moiety of lead compound <b>1</b> produced fused phenylalkanoic acids with favorable in vitro agonist activities and pharmacokinetic profiles. Further optimization led to the discovery of dihydrobenzofuran derivative <b>9a</b> ([(3<i>S</i>)-6-({2′,6′-dimethyl-4′-[3-(methylsulfonyl)propoxy]biphenyl-3-yl}methoxy)-2,3-dihydro-1-benzofuran-3-yl]acetic acid hemi-hydrate, TAK-875) as a potent, selective, and orally bioavailable GPR40 agonist, with a pharmacokinetic profile enabling long-acting drug efficacy. Compound <b>9a</b> showed potent plasma glucose-lowering action and insulinotropic action during an oral glucose tolerance test in female Wistar fatty rats with impaired glucose tolerance. Compound <b>9a</b> is currently in clinical trials for the treatment of type 2 diabetes mellitus.