Transplantation of islets of Langerhans in diabetic rats normalizes resting glucose and insulin levels, but it remains unclear whether islet transplantation restores resting and exercise-induced energy metabolism. Therefore, we compared energy metabolism in islet transplanted rats with energy metabolism in normal controls and in streptozotocin-induced diabetic rats. Indirect calorimetry was applied before, during, and after moderate swimming exercise. Blood was sampled by means of a heart catheter for determination of nutrient and hormone concentrations. In islet transplanted rats, the results from indirect calorimetry and the nutrient and hormone concentrations were similar to the results in normal controls. In resting diabetic rats, insulin levels were very low, while glucose levels were exaggerated. Compared to resting controls, fat oxidation and energy expenditure were elevated, but carbohydrate oxidation was similar. Exercise increased energy expenditure and was similar in diabetic and control rats. Carbohydrate oxidation was lower and fat oxidation was higher in diabetic than in control rats. Exercise-induced increments in glucose, lactate and non-esterified fatty acid levels were the highest in diabetic rats. Thus, at rest, but not during exercise, insulin influences energy expenditure. Insulin reduces lipolysis and glycogenolysis. It enhances the relative contribution of carbohydrate oxidation and reduces fat oxidation to total energy expenditure, at rest and during exercise. Absence of insulin enhances anaerobic glycolytic pathways during exercise. It is concluded that in diabetic rats, islet transplantation of 50% of the normal pancreatic endocrine volume successfully normalizes insulin levels and hence energy metabolism at rest and during exercise.