Diabetic neuropathy is a major complication of diabetes that affects the sensory and autonomic nervous systems and leads to significant morbidity and impact on the quality of life of patients. Mitochondrial stress has been proposed as a major mediator of neurodegeneration in diabetes. This review briefly summarizes the nature of sensory and autonomic nerve dysfunction and presents these findings in the context of diabetes-induced nerve degeneration mediated by alterations in mitochondrial ultrastructure, physiology and trafficking. Diabetes-induced dysfunction in calcium homeostasis is discussed at length and causative associations with suboptimal mitochondrial physiology are discussed. It is clear that across a range of complications of diabetes mitochondrial physiology is impaired, in general a reduction in electron transport chain capability is apparent. This abnormal activity may predispose mitochondria to generate elevated reactive oxygen species, although experimental proof is still lacking, but more importantly will deleteriously alter the bioenergetic status of neurons. It is proposed that the next 5 years of research should focus on identifying changes in mitochondrial phenotype and associated cellular impact, identifying sources of reactive oxygen species in neurons and analyzing mitochondrial trafficking under diabetic conditions.