Although long believed to be inert, C-peptide has now been shown to have definite biological effects both in vitro and in vivo in diabetic animals and in patients with type 1 diabetes. These effects point to a protective action of C-peptide against the development of diabetic microvascular complications. Underpinning these observations is undisputed evidence of C-peptide binding to a variety of cell types at physiologically relevant concentrations, and the downstream stimulation of multiple cell signaling pathways and gene transcription via the activation of numerous transcription factors. These pathways affect such fundamental cellular processes as reabsorptive and/or secretory phenotype, migration, growth, and survival. Whilst the receptor remains to be identified, experimental data points strongly to the existence of a specific G-protein-coupled receptor for C-peptide. Of the cell types studied so far, kidney tubular cells express the highest number of C-peptide binding sites. Accordingly, C-peptide exerts major effects on the function of these cells, and in the context of diabetic nephropathy appears to antagonise the pathophysiological effects of major disease mediators such as TGFβ1 and TNFα. Therefore, based on its cellular activity profile C-peptide appears well positioned for development as a therapeutic tool to treat microvascular complications in type 1 diabetes.