Plasma and urinary levels of UII, a potent vasoactive peptide, are elevated in diabetes mellitus (DM) patients. UII receptor (UT) expression levels are also increased in the kidneys of humans and animals with DM. Palosuran, an orally active UT antagonist, increased insulin levels and improved renal function in uninephrectomized streptozotocin (STZ)-treated rats. However, human studies on the potential use of palosuran for kidney protection in diabetes were inconclusive. In addition to UT antagonism, palosuran can activate somatostatin receptors. Also, the reduced affinity of palosuran for UT in intact cells and tissues suggests that it may not be an optimal UT antagonist. Thus, using non-selective and less potent UT antagonists constitutes a weakness in the scientific rigor of the prior attempts to dissect UT as a potential therapeutic target in DKD. Hence, studies using genetic animal models and highly selective and potent pharmacological antagonists are needed to fill the gaps of understanding on the pathophysiological significance of the UII system in DM. In the present study, we examine the development of hyperglycemia and DKD in the wild-type (WT) and UT knockout (KO) mouse model of type 1 DM. STZ-treated mice showed increased blood glucose levels, glucosuria, decreased plasma insulin levels, and diabetic kidney disease (DKD), which UT KO attenuated. However, UT KO failed to reverse STZ-induced insulin deficiency. To understand the underlying mechanism for alleviating hyperglycemia and DKD in UT KO despite the uncorrected insulin deficiency, we tested the role of the primary insulin counterregulatory hormone, glucagon. We found that STZ treatment increased plasma glucagon levels in WT mice but not in UT KO mice. This finding was supported by double immunohistochemistry of pancreatic islet sections, where STZ treatment reduced insulin and increased glucagon staining. UT KO reversed only the effect of STZ on glucagon staining. These findings suggest that UT KO protects the glucagon-producing alpha cells but not the insulin-producing beta cells. UII increased glucagon secretion in a cultured pancreatic alpha cell line, which UT inhibition reversed. Next, to determine how UII triggers glucagon secretion, we performed membrane potential recordings in alpha cells using the perforated-patch clamp technique. UII produced depolarization of alpha cells. This effect was abolished by UT inhibition. Calcium (Ca2+ ) imaging demonstrated that UII stimulates intracellular Ca2+ ([Ca2+ ]i ) elevation in alpha cells, which T- and L-type Ca2+ channel blockers attenuated. Taken together, the results of this study suggest that: (1) STZ-treatment causes insulin deficiency, hyperglycemia, glucosuria, DKD, and hyperglucagonemia. (2) UT KO reverses STZ effects, except insulin deficiency. (3) UII increases glucagon secretion by alpha cells, mediated by UII-induced membrane depolarization and Ca2+ influx via T- and L-type Ca2+ channels. Therefore, the reversal of hyperglycemia, glucosuria, and DKD in UT KO might be linked to the reversal of hyperglucagonemia.