Diabetes was induced in Lewis rats with streptozotocin. Six to eight months later glomeruli showed mesangial thickening: IgG, IgM and C3 were seen in large quantities in the mesangium by immunofluorescent microscopy. Ten animals then had successful pancreatic transplantation resulting in normal glucose and insulin levels within one to three weeks. Biopsies obtained within the first two weeks following transplantation demonstrated a significant reduction in mesangial thickening and in mesangial staining for IgG, IgM and C3. Three to four weeks after transplantation C3 staining was no longer detected. A gradual reduction in mesangial IgG and IgM localization continued so that by nine weeks following islet transplantation only minimal staining for immunoglobulins was present. Although mesangial thickening was reduced, this abnormality could still be detected in most animals six to nine weeks after transplantation. Three rats showed improvement in glomerular morphology within two weeks despite persistent hyperglycemia. These rats had normal insulin levels at this time. Islet transplantation in inbred diabetic rats effectively returns glucose and insulin levels to normal and results in rapid regression of the light microscopic and immunopathologic glomerular lesions. These studies support the concept of reversible mesangial dysfunction in diabetic rats.