New data indicate that proinsulin C-peptide, contrary to previous views, exerts important physiological effects and shows the characteristics of a bioactive peptide. Studies in animal models and in type 1 diabetes patients have demonstrated multifaceted effects. Peripheral nerve function, as evaluated by determination of sensory nerve conduction velocity and quantitative sensory testing, is improved by C-peptide replacement in diabetes type 1 patients with early stage neuropathy. Similarly, autonomic nerve dysfunction is ameliorated following administration of C-peptide for up to 3 months. C-peptide given to type 1 diabetic animals results in improved nerve conduction velocity and reversal or prevention of nerve structural changes. C-peptide corrects diabetes-induced reductions in endoneurial blood flow and in Na+,K+-ATPase activity. In vitro studies demonstrate that C-peptide binds specifically to cell membranes, activating a G-protein coupled receptor as well as Ca2+-, PKC- and MAPK-dependent signaling pathways, resulting in stimulation of Na+,K+-ATPase and endothelial nitric oxide synthase (eNOS). In addition, C-peptide activates transcription factors resulting in augmented eNOS mRNA and protein content of endothelial cells and modulation of neurotrophic factors as well as apoptotic phenomena in neuroblastoma cells. Combined, the results demonstrate that C-peptide is a bioactive peptide, possibly of importance in the treatment of neuropathy in type 1 diabetes.