Structure and function of peripheral nerve in early insulin deficient streptozotocin diabetic rat were examined. Quantitative studies of myelinated fibres from electron micrographs showed that the fibre calibre and slope coefficients of regression lines between axon and myelin areas were reduced and quantitation of unmyelinated fibres revealed a 40% reduction in area fraction of smooth endoplasmic reticulum. The difference in conduction velocity between diabetic rats and control rats increased with time just as does the difference in fibre calibre. Insulin treatment was able to prevent the decrease in conduction velocity as well as the reduction in fibre calibre. It is concluded that the early structural axon abnormalities results from the diabetic state and cannot be explained by poor general condition of the animals.