Recent advances in the understanding of glucagon-insulin relationships at the level of the islets of Langerhans and of hepatic fuel metabolism are reviewed and their impact on our understanding of glucagon physiology and pathophysiology is considered. It now appears that alpha cells can respond directly to hyperglycaemia in the absence of insulin and beta cells, but that antecedent hyperglycaemia masks or attenuates this response. Insulin appears to exert ongoing release inhibition upon glucagon secretion, probably via the intra-islet microvascular system that connects beta cells to alpha cells. Diabetic hyperglucagonemia in insulin deficient states appears to be secondary to lack of the restraining influence of insulin. The alpha cell response to glucopenia, by contrast, may be in large part mediated by release of noradrenaline from nerve endings in contact with alpha cells. Glucagon's action on glucose and ketone production by hepatocytes is mediated by increase in cyclic-AMP-dependent protein kinase. The opposing action of insulin upon glucagon-mediated events probably occurs largely at this level. Consequently, when glucagon secretion or action is blocked, cyclic-AMP-dependent protein kinase activity is low even in the absence of insulin, explaining why marked glucose and ketone production is absent in bihormonal deficiency states.