Effects of the angiotensin II AT1 receptor antagonist ZD-7155 on nerve function, blood flow, capillarization, oxygenation, and regenerative capacity after injury were studied in streptozocin-diabetic rats. Deficits in saphenous sensory and sciatic motor conduction velocity measured after 1 or 2 mo of diabetes in anesthetized rats were prevented and corrected by ZD-7155. Sciatic resistance to hypoxic conduction failure, which was increased by 71% by 2 mo of diabetes, was attenuated by 39% with ZD-7155. Endoneurial capillary density, which was unaffected by diabetes, was increased by 34% with 2 mo of ZD-7155 treatment. Sciatic nutritive endoneurial blood flow, which was reduced by 45% by 2 mo of diabetes, remained in the nondiabetic range with ZD-7155. Mean endoneurial O2 tension was reduced 38% by diabetes, which was attenuated by ZD-7155. Punctate freeze damage of sciatic nerve caused complete fiber degeneration. Fourteen days postlesion, there was a 26% deficit in myelinated fiber regeneration distance after 2 mo of diabetes, which was prevented by ZD-7155 treatment from diabetes induction. Thus alterations in the renin-angiotensin system contribute to the neurovascular etiology of nerve dysfunction in experimental diabetes.