In this review we will describe the interaction between insulin and C-peptide which enhances and attenuates insulin- signaling functions. We will describe how replenishment of C-peptide prevents and reverses the early metabolic abnormalities in type 1 diabetic polyneuropathy, such as Na+/K+-ATPase activity and endoneurial vascular NO release, resulting in prevention and reversal of early nerve dysfunction. The effects on expression of neurotrophic factors and their receptors, mediated by corrections of early gene responses and transcription factors, have downstream beneficial effects on cytoskeletal protein mRNAs and protein expression. Similar effects probably underlie corrections of cell adhesive molecules. The end-effects are prevention and reversal of myelinated and unmyelinated axonal degeneration, atrophy, and loss. Similarly, progressive degeneration of the node and paranode is prevented and repaired by C-peptide replacement with normalization of the molecular constituents of these functionally important structures. Cognitive dysfunction is now recognized as a complication of type 1 diabetes. Experimentally it is linked to impaired synaptic plasticity and eventually apoptotic neuronal loss caused by impaired insulin action and neurotrophic support. C-peptide replacement partially prevents hippocampal neuronal apoptosis and cognitive deficits. It is therefore becoming increasingly clear that C-peptide has major functions in supporting insulin action with a multitude of beneficial effects on diabetic polyneuropathy and primary diabetic encephalopathy in type 1 diabetes.