Despite the extensive research into the freeze-drying of aqueous solutions of proteins, it remains unknown whether proteins can survive the lyophilization process in a water-organic co-solvent system and how the process and additives affect the structural stability and activity of the proteins. In the present study, a conformational analysis of insulin in the absence/presence of bile salt and trehalose was carried out, before and after freeze-drying of a tert-butyl alcohol (TBA)/water co-solvent system at volume ratios of TBA to water ranging from 50/50 to 0/100. The study involved the use of ultraviolet derivative and fluorescence spectroscopy, circular dichroism (CD) and Fourier transform infrared (FTIR) spectroscopy. Also the bioactivity of insulin was evaluated in vivo using the streptozotocin (STZ)-induced diabetic mice as an animal model. Initial investigations indicate that the extent of the structural change of insulin depends significantly both on the TBA content and on the concentration of additives, such as sodium deoxycholate, prior to lyophilization. This could be accounted for by the phase behavior properties of the TBA/water co-solvent system, surface denaturation together with the selective and/or forced dispersion of insulin during phase separation. Lyophilized insulin in the presence of bile salt and trehalose retained more of its bioactivity and native-like structure in the solid state compared with that in the absence of additives at various TBA/water ratios, although in all cases there was a major and reversible rearrangement of secondary structure after rehydration, except for insulin at 50% TBA (v/v). Furthermore, both lyophilization in non-eutectic systems and less structural changes in the formulation process lead to more bioactivity.