To examine the effect of sensorimotor and gait training on proprioception, nerve function, and muscle activation in diabetic peripheral neuropathy (DPN) patients. Thirty-eight (25 male and 13 female) participants with DPN were selected and randomly allocated to intervention and control group. Participants in the intervention group were provided sensorimotor and gait training for eight weeks (3 days/week) along with diabetes and foot care education; participants in the control group received diabetes and foot care education only. Outcome measures involved proprioception, nerve conduction studies of peroneal and tibial nerve, and activation of lower limb muscles and multifidus while standing with eyes open and eyes closed, and treadmill walking. Mixed ANOVA revealed significant time effect and time×group interaction of proprioception in all four directions (p<0.05). The conduction velocity of peroneal nerve revealed significant time effect (p=0.007) and time×group interaction (p=0.022). Interaction effect was found to be significant for medial gastrocnemius and multifidus while standing with eyes open as well as with eyes closed (p≤0.004). Only multifidus showed significant group (p=0.002) and interaction effect (p=0.003) during walking. Sensorimotor and gait training is an effective tool for improvement of proprioception and nerve function. It benefits muscle activation around ankle and multifidus during postural control and walking in DPN patients. Clinical Trials Registry - India, National Institute of Medical Statistics (Indian Council of Medical Research): Registration Number - CTRI/2017/08/009328.