C-peptide, which is released from the pancreatic beta cells into the circulation in amounts equimolar with insulin, fulfills an important function in the assembly of the two-chain insulin structure, but has otherwise been considered to be biologically inactive. However, during the last few years several experimental and clinical studies have demonstrated that replacement of C-peptide in patients with insulin-dependent diabetes mellitus elicits several physiological effects. Thus, during short-term substitution of C-peptide (1-3 h) decreased glomerular hyperfiltration, augmented whole body and skeletal muscle glucose utilisation, improved autonomic nerve function and a redistribution of microvascular skin blood flow could be observed. In addition, replacement of C-peptide during a period of 1-3 months has been shown to improve renal function as well as autonomic and sensory nerve function in IDDM patients. The mechanisms behind these effects remain unclear, but recent investigations have indicated that an increase in Na+K+ATPase activity and a stimulation of the endothelial nitric oxide synthase may contribute to the observed physiological effects of C-peptide. Not only the intact C-peptide molecule, but also fragments from the C-terminal and mid-portion of the molecule have been shown to exert biological effects. Further research will be necessary to evaluate the underlying mechanism and the clinical impact of C-peptide replacement in IDDM patients.