The effects of reduced renal mass and of islet transplantation on urinary albumin excretion (UAE) rates in diabetic rats were examined. Increased UAE rates were noted two months after the induction of streptozotocin diabetes in 100-gm. inbred Lewis rats. Over the subsequent seven months, UAE rates remained constant in controls but were increasing in diabetic rats at the end of this time. Uninephrectomized nondiabetic rats had increasing UAE with time as compared with intact controls. Uninephrectomized diabetic rats had greater UAE than their respective controls, and the magnitude of this difference increased over the nine-month period of these studies. Uninephrectomized and intact rats, diabetic for seven months, were cured of the diabetic state by neonatal pancreatic tissue administered via the portal vein. Within one month of transplantation, UAE values decreased in these animals as compared with their pretransplant values and, within two months, were no longer different from values in their respective nondiabetic controls. In contrast, untreated uninephrectomized and intact diabetic rats increased their UAE over these same two months. At two months posttransplant, glomerular mesangial thickening was decreased in transplanted uninephrectomized and intact diabetic rats when compared with their respective untreated diabetic littermates. Thus, the albuminuria of diabetes in rats is reversed by pancreatic islet transplantation. It is unclear whether this reversal is primarily due to improvement in functional or structural abnormalities in glomeruli of diabetic rats.