Aims/hypothesis Type 1 diabetes is a chronic disease leading to complications such as peripheral neuropathies, nephropathy and cardiovascular disease. Pancreatic islet transplantation is being extensively investigated for blood glucose control in animals and in human type 1 diabetic patients, but the question of whether it can reverse long-term diabetic complications has not been fully explored. We investigated the effects of islet transplantation on diabetic complications in a rat model of streptozotocin-induced diabetes.Methods Three groups of rats were used: healthy controls, diabetic and diabetic rats transplanted with microencapsulated islets at 2 months after diabetes induction, when neuropathy was detectable by a decrease in tail nerve conduction velocity (NCV) and impaired nociceptive thresholds. Blood glucose levels and body weight were measured weekly. The variables considered were: thermal (hot plate test) and mechanical sensitivity (Randal-Selitto paw withdrawal test), NCV and Na+, K+-ATPase activity in the sciatic nerve. At the end of the experiments hearts were removed for morphometric determination and myocyte number, and kidneys removed for histological examination. Results Islet transplantation in diabetic rats induced normoglycaemia in a few days, accompanied by a rapid rise in body weight and amelioration of impaired nociceptive thresholds, as well as normalisation of NCV and Na + , K + -ATPase, which were both about 25% below normal in diabetic rats. Myocyte loss was reduced (−34%) by islet transplantation and the observed mild kidney damage of diabetic rats was prevented. Conclusions/interpretation Besides controlling glycaemia, transplantation of microencapsulated pancreatic islets induced almost complete regression of neuropathy and prevented cardiovascular alterations.