Acetylcholine release from cholinergic nerves in the gastrointestinal tract is limited by neuronal M(2) muscarinic receptors. In diabetic animals, M(2) muscarinic receptor function in the ileum is increased, leading to decreased acetylcholine release and smooth muscle contraction in response to nerve stimulation. The mechanisms responsible for increased M(2) muscarinic receptor function are unknown but may contribute to the gastrointestinal dysmotility that occurs frequently in diabetics. In this study, we investigated whether insulin modulates M(2) muscarinic receptor function in the gastrointestinal tract of diabetic rats. M(2) muscarinic receptor function was tested by measuring the ability of an agonist, pilocarpine, to inhibit and an antagonist, methoctramine, to potentiate electrical field stimulation (EFS)-induced contraction of ileum in vitro. Insulin administration (0.2, 0.6, and 2 U s.c. daily for 7 days) reversed the diabetes-induced increase in M(2) muscarinic receptor function and restored normal contractions to EFS. Insulin had no effect on the function of postjunctional M(3) muscarinic receptors, determined by measuring contractile responses to acetylcholine. These data suggest that insulin tonically inhibits neuronal M(2) muscarinic receptors. Thus, loss of insulin removes this inhibition and increases M(2) muscarinic receptor function leading to decreased acetylcholine release and contraction to EFS. In nondiabetic rats, there was a trend that higher insulin doses (0.6 and 2 U) increased M(2) muscarinic receptor function, suggesting a bell-shaped concentration-response relationship for insulin. In conclusion, lack of insulin or excess insulin increases M(2) muscarinic receptor function in rat ileum. This mechanism may contribute to decreased acetylcholine release in the gastrointestinal tract of diabetics, resulting in dysmotility.