A susceptibility gene for type I diabetes is present on chromosome 11p15.5, but its location, identity, and mechanism of action are unknown. We have sequenced 14 kilobases of DNA flanking the human insulin gene and found new DNA polymorphisms and determined their frequencies in the general population and in families of type I diabetic subjects. A DNA polymorphism located 3123 base pairs downstream from the initiation site of transcription of the insulin gene, when present in the homozygous state, provides a relative risk for type I diabetes of 5.2 (P = 0.006). However, this DNA polymorphism as well as other diabetes-associated 3′ markers are in linkage-disequilibrium with the actual susceptibility region, because these polymorphisms are found on haplotypes both positively and negatively associated with type I diabetes susceptibility. Nucleotide sequence analysis of the variable tandem repeat region flanking the 5′ end of the insulin gene shows variable tandem repeat elements associated with these haplotypes to differ greatly in composition, i.e., an ATAGGGGTGTGGGG repeat element is absent on a haplotype associated with type I diabetes susceptibility, but is found in 6–10 copies on two haplotypes negatively associated with the disease. These findings suggest that the type I diabetes susceptibility locus on chromosome 11p15.5 is probably located in the 5′ variable tandem repeat region rather than in the 3′ region of the insulin gene.