Neuropathic pain is a common phenomenon resulting from injury to the central or peripheral nervous system. The means by which diabetes results in nerve injury is unclear but the effect is to cause injury at all levels of the nervous system from the level of the peripheral nerves to the brain. Nerve injury causes pain through a cascade of mechanisms resulting in altered processing of sensory input into the nervous system. This alteration occurs through chemical and anatomical changes in the nervous system that are similar to some of the processes seen in central sensitisation following acute pain. Following nerve injury, neuropathic pain occurs not only when these mechanisms are activated but also when sensitisation is maintained. Other processes occurring in neuropathic pain appear to be a loss of normal inhibitory controls as seen by a reduction in local GABA-ergic and descending monoaminergic influences. There are also important changes mediated via glial cells that can maintain neuropathic pain. Diabetes affects all areas of the nervous system and the contribution of higher levels of the nervous system is often overlooked. Neurophysiological and MRI evidence strongly suggest that these may contribute to the pain of diabetic neuropathy. Psychological dysfunction in diabetic patients is an important factor in increasing the suffering associated with all aspects of the disease, but treatment and control of pain can greatly improve the quality of life.