A fifteen-year-old girl with classical lipoatrophic diabetes has been studied intensively for over a year. Plasma insulin level was at the upper range of normal in thefasting state, but the insulin response to a glucose load was delayed and suboptimal. No excess of growth hormone was demonstrated. Plasma disappearance of insulin-I-131 was normal. Substances with potent lipid mobilizing activity and insulin antagonism were found in the urine. Effects of altering periodicity of meals, increase of calories, addition of insulin, insulin plus an oral hypoglycemic agent, insulin plus a corticosteroid and insulin plus an anabolic agent have been observed. It was established that a 2000 calorie intake divided into three to ten equal feedings per day was effective in lowering the hyperlipemia and hyperglycemia. Concomitant administration of insulin and prednisone produced normoglycemia and a progressive and marked rise of all blood lipid fractions. Light and electron microscopy of skin biopsy showed a complete absence of the typical signet-cell type adult fat cells in the subcutaneous tissue, but cells containing numerous minute fat droplets, resembling immature fat cells, were seen. Renal biopsy revealed changes characteristic of Kim melstiel-Wilson's disease. Although the source of the substance with lipid mobilizing activity found in the patient's urine remains conjectural, it is postulated that this substance promotes rapid hydrolysis of triglycerides to fatty acids and glycerol thereby inhibiting the accumulation of triglycerides in adipose tissue. Excessive fatty acid mobilization leads to insulin resistance and interferes with peripheral glucose utilization.