In an attempt to elucidate molecular mechanisms and factors involved in β cell regeneration, we evaluated a possible role of the l-arginine–nitric oxide (NO)-producing pathway in alloxan-induced diabetes mellitus. Diabetes was induced in male Mill Hill rats with a single alloxan dose (120 mg kg−1). Both non-diabetic and diabetic groups were additionally separated into three subgroups: (i) receiving l-arginine · HCl (2.25%), (ii) receiving l-NAME · HCl (0.01%) for 12 days as drinking liquids, and (iii) control. Treatment of diabetic animals started after diabetes induction (glucose level ≥ 12 mmol l−1). We found that disturbed glucose homeostasis, i.e. blood insulin and glucose levels in diabetic rats was restored after l-arginine treatment. Immunohistochemical findings revealed that l-arginine had a favourable effect on β cell neogenesis, i.e. it increased the area of insulin-immunopositive cells. Moreover, confocal microscopy showed colocalization of insulin and pancreas duodenum homeobox-1 (PDX-1) in both endocrine and exocrine pancreas. This increase in insulin-expressing cells was accompanied by increased cell proliferation (observed by proliferating cell nuclear antigen-PCNA immunopositivity) which occurred in a regulated manner since it was associated with increased apoptosis (detected by the TUNEL method). Furthermore, l-arginine enhanced both nuclear factor-kB (NF-kB) and neuronal nitric oxide synthase (nNOS) immunopositivities. The effect of l-arginine on antioxidative defence was observed especially in restoring to control level the diabetes-induced increase in glutathione peroxidase activity. In contrast to l-arginine, diabetic pancreas was not affected by l-NAME supplementation. In conclusion, the results suggest beneficial l-arginine effects on alloxan-induced diabetes resulting from the stimulation of β cell neogenesis, including complex mechanisms of transcriptional and redox regulation.