The silicone chamber model was used to evaluate peripheral nerve regeneration (PNR) in streptozocin (STZ)-induced diabetic rats. Diabetic and control animals underwent sciatic nerve transection and silicone chamber implantation establishing gaps of various lengths between the transected nerve ends. In animals with 5 and 10 mm gaps, diabetes was induced in experimental rats 1 week before surgery, and the animals were sacrificed 3 weeks after surgery. In animals with 8 mm gaps, diabetes induction occurred 3 days after surgery, and they were sacrificed after 7 weeks. Diabetic rats with 10 mm gaps demonstrated an impaired ability to form bridging cables, the initial step of regeneration through chambers. Morphometric studies of bridging cables between transected nerve ends demonstrated a significant reduction in the mean endoneurial area in diabetic animals with 5 and 8 mm gaps compared to controls. The number of regenerated myelinated axons in the chamber was significantly decreased in diabetic rats with 8 and 10 mm gaps. The mean myelinated fiber area in the regenerated cables of the diabetic group was significantly decreased with 5 mm gaps and significantly increased with 8 mm gaps compared to controls. Size-frequency histograms of regenerated myelinated fiber areas suggest a delay in the maturation of small caliber axons. Schwann cell migration across 5 mm gaps was examined with S-100 immunohistochemistry. The total distance of Schwann cell migration into cables from both proximal and distal ends was significantly reduced in diabetic animals. Characterization of PNR across gaps through silicone chambers in diabetic rats showed impairment in multiple aspects of the regenerative process, including cable formation, Schwann cell migration, and axonal regeneration.