The content of 1,2-diacylglycerol (DAG) was determined in sciatic nerves from normal and streptozotocin-induced diabetic rats. In nerves frozen in situ, DAG content was reduced 22% in the proximal region and 77% in the distal region of diabetic nerve, principally because of the loss of associated fat. DAG levels in freshly dissected and desheathed diabetic nerve were decreased from 23 to 30% as compared with normal nerve. Determination of DAG molecular species distribution in desheathed normal nerve indicated that 18:0/20:4 accounted for 34%, 16:0/18:1 for 17%, and several other polyunsaturated fatty acid-containing species for 17% of the total. In diabetic nerve, the quantity of the 18:0/20:4 DAG, species was reduced by 37%, and this drop was 62% of the reduction in all molecular species. The content of the minor species, 16:0/20:4 DAG, was decreased by 48%. Our results suggest that nerve DAG arises in large part from phosphoinositide degradation. Moreover, these results provide support for the hypothesis that reduced Na+,K(+)-ATPase activity in diabetic nerve is a consequence of decreased phosphoinositide turnover, which thereby generates insufficient DAG to maintain a protein kinase C-mediated step necessary for activation of Na+,K(+)-ATPase.