1. Diabetes mellitus produces marked abnormalities in motor nerve conduction, but the mechanism is not clear. In the present study we hypothesized that in the streptozotocin (STZ)-induced diabetic rat impaired vasodilator function is associated with reduced endoneural blood flow (EBF) which may contribute to nerve dysfunction. 2. We examined whether diabetes-induced reductions in sciatic nerve conduction velocity and EBF were associated with impaired endothelium-dependent dilation in adjacent arterioles. We measured motor nerve conduction velocity (MNCV) in the sciatic nerve using a non-invasive procedure, and sciatic nerve nutritive blood flow using microelectrode polarography and hydrogen clearance. In vitro videomicroscopy was used to quantify arteriolar diameter responses to dilator agonists in arterioles overlying the sciatic nerve. 3. MNCV and EBF in 4-week-STZ-induced diabetic rats were decreased by 22% and 49% respectively. Arterioles were constricted with U46619 and dilation to acetylcholine (ACh), aprikalim, or sodium nitroprusside (SNP) examined. All agonists elicited dose-dependent dilation in control and diabetic rats, although ACh-induced dilation was significantly reduced in diabetic rats. Treating vessels from normal or diabetic rats with indomethacin (INDO) alone did not significantly affect ACh-induced relaxation. However, ACh-induced vasodilation was significantly reduced by treatment with KCl or Nomega-nitro-L-arginine (LNNA) alone. Combining LNNA and KCl further reduced ACh-induced dilation in these vessels. 4. Diabetes causes vasodilator dysfunction in a microvascular bed that provides circulation to the sciatic nerve. These studies imply that ACh-induced dilation in these vessels is mediated by multiple mechanisms that may include the endothelial-dependent production of nitric oxide and endothelial-derived hyperpolarizing factor. This impaired vascular response is associated with neural dysfunction.