In epineurial arterioles, acetylcholine-mediated vascular relaxation is mediated by nitric oxide and endothelium-derived hyperpolarizing factor (EDHF), and both mechanisms are impaired by diabetes. The mediator responsible for the effect of EDHF is unknown. In epineurial arterioles, C-type natriuretic peptide (CNP) has properties consistent with EDHF-like activity. Epineurial arterioles express CNP, and exogenous CNP causes a concentration-dependent vascular relaxation. In streptozotocin-induced diabetic rats, CNP-mediated vascular relaxation in epineurial arterioles is decreased. Since CNP may be a regulator of vascular function, a vasopeptidase inhibitor may be an effective treatment for diabetes-induced vascular and neural disease. Vasopeptidase inhibitors inhibit ACE activity and neutral endopeptidase, which degrades natriuretic peptides. Streptozotocin-induced diabetic rats were treated with AVE7688 (450 mg/kg in the diet), a vasopeptidase inhibitor, for 8-10 weeks after 4 weeks of untreated diabetes. Treatment of diabetic rats corrected the diabetes-induced decrease in endoneurial blood flow, significantly improved motor and sensory nerve conduction velocity, prevented the development of hypoalgesia in the hind paw, and reduced superoxide and nitrotyrosine levels in epineurial arterioles. The diabetes-induced decrease in acetylcholine-mediated vascular relaxation by epineurial arterioles was significantly improved with treatment. These studies suggest that vasopeptidase inhibitors may be an effective approach for the treatment of diabetic vascular and neural dysfunction.