Hepatic plasma membranes prepared from rats rendered diabetic by streptozotocin bound approximately twice as much insulin per 50 mug protein as control membranes. Glucagon binding of diabetic and control membranes was virtually identical. This increased insulin binding was not due to a nonspecific effect of streptozotocin, decreased degradation of insulin slower dissociation from its receptor, or a selective higher yield of membranes prepared from the diabetic livers. Diabetic and control membranes both showed negative cooperativity. Scatchard analysis suggested that the difference in binding was due to an enhanced binding capacity of the diabetic membranes rather than increased affinity of the binding sites. Increased insulin binding of diabetic membranes was returned to normal by insulin treatment. These data are consistent with the postulate that there is an inverse relationship between circulating insulin levels and insulin binding and that insulin may modulate its own receptor. However, since it has been reported that fat, muscle, and hepatic tissue from rats made diabetic by alloxan administration are insensitive to insulin, the capacity for binding can not be the sole factor determining the response to insulin in diabetes mellitus. Therefore, sensitivity of the diabetic liver to insulin is determined, at least in part, by events subsequent to the binding of insulin to its receptor.