The increased rate of fetal malformation in diabetic pregnancy represents both a clinical problem and a research challenge. In recent years, experimental and clinical studies have given insight into the teratological mechanisms and generated suggestions for improved future treatment regimens. The teratological role of disturbances in the metabolism of inositol, prostaglandins, and reactive oxygen species has been particularly highlighted, and the beneficial effect of dietary addition of inositol, arachidonic acid and antioxidants has been elucidated in experimental work. Changes in gene expression and induction of apoptosis in embryos exposed to a diabetic environment have been investigated and assigned roles in the teratogenic processes. The diabetic environment appears to simultaneously induce alterations in several interrelated teratological pathways. The complex pathogenesis of diabetic embryopathy has started to unravel, and future research efforts will utilize both clinical intervention studies and experimental work that aim to characterize the human applicability and the cell biological components of the discovered teratological mechanisms.