Abstract Painful neuropathy is a common complication of diabetes. Particularly in the early stage of diabetic neuropathy, patients are characterized by burning feet, hyperalgesia to heat, and mechanical stimuli, as if residual nociceptors were sensitized. Such symptoms are barely explained by common pathophysiological concepts of diabetic neuropathy. Diabetes was induced in Wistar rats by streptozotocin (STZ). After 4weeks behavioral testing (Plantar test, Randall–Selitto) was conducted. Basal and stimulated release of calcitonin gene-related peptide (CGRP), Substance P (SP) and prostaglandin E2 (PGE2) from isolated skin and sciatic nerve were assessed by enzyme immunoassays. Electrophysiological properties of identified nociceptors under hyperglycemic, hypoxic, and acidotic conditions were investigated using the skin-nerve preparation. The diabetic rats showed hyperalgesia to heat and pressure stimulation. The basal CGRP/SP release was reduced, but chemical stimulation with bradykinin induced greater release of SP, CGRP and PGE2 than in control animals. In contrast, capsaicin-stimulated CGRP release was reduced in sciatic nerves. Hypoxia per se lowered von Frey thresholds of most C-nociceptors to half. Hyperglycemic hypoxia induced ongoing discharge in all diabetic but not control C-fibers which was further enhanced under acidosis. Sensory and neurosecretory nociceptor functions are sensitized in diabetes. Diabetic C-fibers show exaggerated sensitivity to hyperglycemic hypoxia with and without additional acidosis, conditions that are thought to mimic ischemic episodes in diabetic nerves. Ongoing C-fiber discharge is known to induce spinal sensitization. Together with altered receptor and ion channel expressions this may contribute to painful episodes in diabetic neuropathy.