Diabetic neuropathy is one of the most frequent complications in diabetes but there are no treatments beyond glucose control, due in part to the lack of an appropriate animal model to assess an effective therapy. This study was undertaken to characterize the degenerative and regenerative responses of peripheral nerves after induced sciatic nerve damage in transgenic rat insulin I promoter / human interferon beta (RIP/IFNbeta) mice made diabetic with a low dose of streptozotocin (STZ) as an animal model of diabetic complications. In vivo, histological and immunohistological studies of cutaneous and sciatic nerves were performed after left sciatic crush. Functional tests, cutaneous innervation, and sciatic nerve evaluation showed pronounced neurological reduction in all groups 2 weeks after crush. All animals showed a gradual recovery but this was markedly slower in diabetic animals in comparison with normoglycemic animals. The delay in regeneration in diabetic RIP/IFNbeta mice resulted in an increase in active Schwann cells and regenerating neurites 8 weeks after surgery. These findings indicate that diabetic-RIP/IFNbeta animals mimic human diabetic neuropathy. Moreover, when these animals are submitted to nerve crush they have substantial deficits in nerve regrowth, similar to that observed in diabetic patients. When wildtype animals were treated with the same dose of STZ, no differences were observed with respect to nontreated animals, indicating that low doses of STZ and the transgene are not implicated in development of the degenerative and regenerative events observed in our study. All these findings indicate that RIP/IFNbeta transgenic mice are a good model for diabetic neuropathy.