Lung function was assessed in 35 nonsmoking adults with insulin dependent diabetes mellitus and 34 matched control subjects. The tests included spirometry, lung volumes, CO transfer factor and maximum respiratory pressures. Additionally, in subjects under 35 years of age (20 patients and 18 controls) measurements of CO transfer factor were obtained during exercise at three different workloads. Random blood glucose and glycosylated haemoglobin were measured and each patient's diabetic history was recorded. The total lung capacity (TLC) in the patients was lower than those recorded for the controls (P less than 0.05) but there were no significant differences in respiratory muscle strength between the groups. In the young group of patients (less than 35 years) the transfer factor for CO (TLCO) was similar but the volume corrected transfer coefficient (KCO) was higher at rest than in the controls (P less than 0.02). The KCO remained high in these patients during exercise. The older patients (greater than 35 years) showed a lower TLCO (P less than 0.01) with a similar KCO to the controls. The association of a reduction in TLC and higher KCO in the young patients suggests an extrapulmonary mechanism of lung volume restriction. This is not attributable to muscle weakness but might be due to limited expansion of the rib cage. In older patients any tendency for KCO to rise may be masked by disease-related changes in the pulmonary microvasculature.