Nine different liver function tests (LFT) were assessed in 175 unselected diabetic outpatients stabilized on diet, insulin, or oral hypoglycemic drugs. In another group of 72 diabetic inpatients having diagnostic liver biopsy, relationships between LFT and histologic changes in the liver were investigated. Abnormalities in at least one of the tests were noted in 57% of the outpatients, and two tests gave pathologic results in 27%. The non-insulin-dependent diabetic patients more often had abnormal LFT results than did the insulin-dependent diabetic patients. Serum chenodeoxycholic acid concentrations were increased in 27%, gamma-glutamyl transpeptidase (gGT) activities in 19%, and alanine aminotransferase (Alt) activities in 17% of the outpatients, but the increases were rarely more than twice the upper limit of normal. In multivariate analysis, outpatients who were overweight, showed poor diabetes control during a short duration of diabetes controlled by treatment with diet or oral agents, and had a mature age at onset of diabetes displayed the most significant clinical explanatory variables associated with abnormal Alt. In the inpatients, the percentages of abnormal Alt and gGT results were augmented, along with increasing severity of histologic changes, but the mean values of Alt and gGT did not differ significantly between the various histologic groups. In addition, the diabetic patients with nonspecific inflammatory changes or increase in liver fibrosis often showed normal or only minor elevations in these test values.