Diabetes-associated mitochondrial dysfunction is recognized, but the underlying mechanisms are unknown. Using isolated liver mitochondria from streptozotocin-induced diabetic Sprague-Dawley rats, we showed that diabetes can result in a > 95% loss in mitochondrial transcriptional capacity. Decreased transcription correlated well with both disease status, as indicated by serum lipemia and ketone levels, and with increased resistance of the mitochondrial transcription system to oxidative stress imposed by the hydrophilic AAPH [2,2'-azobis-(2-amidino-propane) hydrochloride] or the hydrophobic AMVN [2,2'-azobis-(2,4,-dimethyl-valeronitrile)]. The onset of AAPH- or AMVN-induced lipid peroxidation was also delayed; this suggests that liver mitochondrial membranes from diabetics have increased resistance to peroxyl radical-mediated lipid peroxidation. Lipid peroxidation induced endogenously was increased, however, suggesting a state of increased oxidative stress likely exists in vivo. Furthermore, changes in the rate of lipid peroxidation occurring during the propagation phase were also affected by diabetes. This implies possible changes in lipid composition or structure. Analysis indicated that the factors protecting mitochondria from lipid peroxidation differ from those involved in protecting the transcription system, and that both are independent of free radical scavenger levels. These results suggested that diabetes alters mitochondrial exposure and/or response to reactive species and provided clues to the role of oxidant stress in the development of diabetes-associated mitochondrial dysfunction.