Many patients with diabetes mellitus present abnormalities in levels of circulating lipids in absence of ketoacidosis and renal disease. These are characterized by elevation of serum fatty acid and triglyceride levels, with only moderate or no increase of serum cholesterol and phospholipid levels. Two factors are involved; they are decompensation of deranged carbohydrate metabolism (lack of insulin) and presence of vascular complications. If maintenance of normal levels of circulating lipids is added to the criteria of management in diabetes mellitus, prognosis for such patients may be improved, especially in regard to complications. Findings are based on data obtained in clinical studies of 94 patients with diabetes compared with similar studies of 24 normal healthy persons.