Diabetic polyneuropathy (DPN) occurs more frequently in type 1 diabetes resulting in a more severe DPN. The differences in DPN between the two types of diabetes are due to differences in the availability of insulin and C-peptide. Insulin and C-peptide provide gene regulatory effects on neurotrophic factors with effects on axonal cytoskeletal proteins and nerve fiber integrity. A significant abnormality in type 1 DPN is nodal degeneration. In the type 1 BB/Wor-rat, C-peptide replacement corrects metabolic abnormalities ameliorating the acute nerve conduction defect. It corrects abnormalities of neurotrophic factors and the expression of neuroskeletal proteins with improvements of axonal size and function. C-peptide corrects the expression of nodal adhesive molecules with prevention and repair of the functionally significant nodal degeneration. Cognitive dysfunction is a recognized complication of type 1 diabetes, and is associated with impaired neurotrophic support and apoptotic neuronal loss. C-peptide prevents hippocampal apoptosis and cognitive deficits. It is therefore clear that substitution of C-peptide in type 1 diabetes has a multitude of effects on DPN and cognitive dysfunction. Here the effects of C-peptide replenishment will be extensively described as they pertain to DPN and diabetic encephalopathy, underpinning its beneficial effects on neurological complications in type 1 diabetes.