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Abstract Objective To evaluate the therapeutic potential of stem cells from human exfoliated deciduous teeth (SHED) for diabetic peripheral neuropathy. Methods The biological characteristics of SHED were identified by flow cytometric study and evaluation of differentiation potential. Using high-fat feeding, diabetes was induced in GK rats, and SHED were transplanted into the caudal veins of these rats. Immunohistochemical analysis was used to compare the capillary to muscle fiber ratio and intra-epidermal nerve fiber density between SHED- and saline-treated diabetic rats. Further, the expressions of angiogenesis-related and neurotrophic factors were quantified by real-time PCR and western blot. Results SHED had a capacity of multiple differentiation and shared typical characteristics of mesenchymal stem cells. SHED transplantation relieved diabetic neuropathic pain, enabled functional recovery of the peripheral nerves, and increased the capillary to muscle fiber ratio and intra-epidermal nerve fiber density compared to the saline group and normal controls. Real-time PCR results showed that the expressions of CD31, vWF, bFGF, NGF, and NT-3 in the skeletal muscles were higher in the SHED group than in the saline groups. Western blot results indicated that the levels of the CD31 and NGF proteins were higher in the SHED transplantation group than the saline group. Conclusion SHED transplantation ameliorated diabetic peripheral neuropathy in diabetic GK rats. Thus, systemic application of SHED could be a novel strategy for the treatment of diabetic peripheral neuropathy.