Oxidative and nitrosative stress play a key role in the pathogenesis of diabetic neuropathy, but the mechanisms remain unidentified. Here we provide evidence that poly(ADP-ribose) polymerase (PARP) activation, a downstream effector of oxidant-induced DNA damage, is an obligatory step in functional and metabolic changes in the diabetic nerve. PARP-deficient (PARP^−/−) mice were protected from both diabetic and galactose-induced motor and sensory nerve conduction slowing and nerve energy failure that were clearly manifest in the wild-type (PARP^+/+) diabetic or galactose-fed mice. Two structurally unrelated PARP inhibitors, 3-aminobenzamide and 1,5-isoquinolinediol, reversed established nerve blood flow and conduction deficits and energy failure in streptozotocin-induced diabetic rats. Sciatic nerve immunohistochemistry revealed enhanced poly(ADP-ribosyl)ation in all experimental groups manifesting neuropathic changes. Poly(ADP-ribose) accumulation was localized in both endothelial and Schwann cells. Thus, the current work identifies PARP activation as an important mechanism in diabetic neuropathy and provides the first evidence for the potential therapeutic value of PARP inhibitors in this devastating complication of diabetes.