Background Diabetic peripheral neuropathy (DPN) is the most common chronic complication of diabetes. We aim to investigate the efficacy of Prostaglandin E1 (PGE1) treatment in addition to intensive insulin therapy on DPN in patients with type 2 diabetes. Methods Seventy-seven patients with DPN received daily intravenous injection of Prostaglandin E1 (PGE1) in lipid microspheres (Lipo-PGE1) for 10 days as an additional therapy to standard glucose control therapy (PGE1 group). Another 42 patients with DPN receiving only standard glucose control therapy (intensive insulin therapy) acted as a control group. Michigan neuropathy screening instrument (MNSI) score, neurophysiology examination, transcutaneous oxygen sensory threshold, and ankle-brachial index (ABI) were measured to evaluate the efficacy of PGE1 treatment as compared with control group. Results Standard glucose control therapy decreased plasma glucose to a similar level in both PGE1 and control groups. Compare to control group, PGE1 group displayed improvement in several nerve electrophysiological indexes. MNSI score was significantly improved in patients who received PGE1 treatment compared with the control group (p < 0.001) after 10 days of PGE1 treatment. Similarly, nerve conduction velocity and foot sensory thresholds (p < 0.05 for all) also significantly improved compared with the control group after 10 days of PGE1 treatment. However, only intensive insulin therapy did not improve any neural function. Conclusions Lipo-PGE1 can effectively improve neural function of patients with DPN. [ABSTRACT FROM AUTHOR]