Liver function tests were performed in severe and mild diabetic rats and under the influence of ATP. In mild diabetics the serum cholesterol was significantly increased, while in severe diabetes the serum cholesterol was significantly lower than in mild diabetes. The decreased serum cholesterol in severe diabetes may be an indication for the development of fatty liver. The serum alkaline phosphatase and serum bilirubin were significantly increased in both the severe and mild diabetic states, while the thymol turbidity test was insignificantly changed in both states of diabetes. Serum albumin was significantly decreased in 10 days mild diabetes, while it was insignificantly changed in 48 hrs severe diabetic animals. The effect of ATP was investigated in mild diabetes. ATP resulted in a significant increase in serum albumin and a decrease in total globulins with the resultant increase in A/G ratio. The serum alkaline phosphatase exhibited a significant reduction under the influence of ATP. The elevated cholesterol of mild diabetic rats remained significantly elevated and was not reduced by ATP, though the fat content of the liver showed a significant reduction. This may be due to more rapid mobilisation of fat from the liver under the influence of ATP. ATP showed no significant effect on serum bilirubin and thymol turbidity test. the histopathological examination of the liver revealed that administration of ATP to alloxan diabetic rats had a beneficial effect. It resulted in disappearrance of the fat globules from the liver cells.