Twenty diabetic patients with neuropathy underwent clinical and neurophysiological evaluation together with a detailed morphometric assessment of capillary pathology in endoneurial and epineurial microvascular beds of the sural nerve. Morphological data were compared with ten non-diabetic control subjects. There were no significant differences in control subjects between basement membrane area, endothelial cell area, endothelial cell profile number or luminal area of endoneurial when compared with epineurial capillaries. In contrast, when compared with epineurial capillaries, endoneurial capillaries from diabetic patients demonstrated a significant increase in basement membrane (p < 0.001) and endothelial cell (p < 0.001) area and a significant reduction in luminal area (p < 0.001). There was no significant difference in endothelial cell profile number between endoneurial and epineurial capillaries amongst diabetic patients. Previous studies have demonstrated a good correlation between the degree of microangiopathy and measures of neuropathic severity. In the present study increased endoneurial capillary basement membrane area was significantly related to reduced peroneal nerve conduction velocity (p < 0.001), myelinated fibre density (p < 0.001) and elevated vibration (p < 0.05) and thermal (p < 0.001) perception. Increased endothelial cell area and reduced luminal size were related to a reduced peroneal nerve conduction (p < 0.05, p < 0.01, respectively), reduced myelinated fibre density (p < 0.05, p < 0.01) and elevated thermal perception (p < 0.05, p < 0.001). Epineurial capillary basement membrane, endothelial cell and luminal area failed to relate to measures of neuropathic severity.(ABSTRACT TRUNCATED AT 250 WORDS)