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The effect of streptozotocin diabetes on some ovarian functions in adult rats was examined. Diabetic diestrus animals showed reduced ovary weight and lower circulating levels of progesterone. Scatchard plots of binding data derived from ovarian particulate fractions of normal and streptozotocin diabetic rats revealed the presence of one class of binding sites with high affinity for 125I-hCG. The apparent association constant of the hCG receptors of diabetic ovaries was comparable to that of normal gonads. However, a marked decrease (42%) in the number of hCG binding sites was found in diabetic animals. With isolated luteal cells similar results were obtained, and the administration of insulin to streptozotocin diabetic rats restored to normality the number of hCG binding sites. The maximal response of progesterone production by luteal cells from control ovaries was obtained with 10(-10) M hCG. A 100-fold higher concentration of hCG was required for the maximum stimulation of cAMP synthesis. The cAMP response of cells from diabetic rats was significantly higher than that of control cells. However, luteal cells from diabetic rats showed some loss of sensitivity in the synthesis of progesterone during incubation with hCG. Most of the alterations seen in diabetic female rats could be restored with insulin therapy, indicating that insulin plays an important role in the regulation and maintenance of normal reproductive functions. It is suggested that the diminution of the LH receptor population causes the disruption of normal luteal cell function. This fact could be responsible for some of the reproductive alterations in the diabetic female rat.