Ninety-four normotensive type II diabetics with normal renal function and microalbuminuria were randomized to receive enalapril 10 mg/day or placebo and were followed for five years. In the patients treated by enalapril plasma creatinine values and albuminuria remained stable throughout the observation period. Their plasma total cholesterol decreased from an initial value of 245 ± 27 mg/dl to mean study value of 236 ± 29 mg/dl, and to a fifth year value of 232 ± 27 mg/dl (P < 0.001). The changes in HDL cholesterol and triglyceride values were nonsignificant. In the placebo group there was a significant increase in albuminuria and a mean decline of 13% in reciprocal creatinine values during the five years. Plasma total cholesterol increased from an initial mean value of 246 ± 24 to a mean study value of 252 ± 25 mg/dl, and to a fifth year mean value of 259 ± 32 mg/dl (P < 0.001). There was a significant correlation between both initial and mean plasma total cholesterol values, and the decline in renal function and the rise in albuminuria in the placebo treated patients. This correlation persisted after stratification for blood pressure. Treatment with enalapril did not eliminate these correlations. Cholesterol may be an additional risk factor for diabetic nephropathy. ACE inhibitors may have a modest cholesterol lowering effect in diabetic patients mediated, in part, through the decline in albuminuria.