Introduction. Current clinical guidelines for management of diabetic peripheral neuropathy (DPN) emphasize good glycemic control. However, this has limited effect on prevention of DPN in type 2 diabetic (T2D) patients. This study investigates the effect of insulin treatment on development of DPN in a rat model of T2D to assess the underlying causes leading to DPN. Methods. Twelve-week-old male Sprague-Dawley rats were allocated to a normal chow diet or a 45% kcal high-fat diet. After eight weeks, the high-fat fed animals received a mild dose of streptozotocin to induce hyperglycemia. Four weeks after diabetes induction, the diabetic animals were allocated into three treatment groups receiving either no insulin or insulin-releasing implants in a high or low dose. During the 12-week treatment period, blood glucose and body weight were monitored weekly, whereas Hargreaves' test was performed four, eight, and 12 weeks after treatment initiation. At study termination, several blood parameters, body composition, and neuropathy endpoints were assessed. Results. Insulin treatment lowered blood glucose in a dose-dependent manner. In addition, both doses of insulin lowered lipids and increased body fat percentage. High-dose insulin treatment attenuated small nerve fiber damage assessed by Hargreaves' test and intraepidermal nerve fiber density compared to untreated diabetes and low-dose insulin; however, neuropathy was not completely prevented by tight glycemic control. Linear regression analysis revealed that glycemic status, circulating lipids, and sciatic nerve sorbitol level were all negatively associated with the small nerve fiber damage observed. Conclusion. In summary, our data suggest that high-dose insulin treatment attenuates small nerve fiber damage. Furthermore, data also indicate that both poor glycemic control and dyslipidemia are associated with disease progression. Consequently, this rat model of T2D seems to fit well with progression of DPN in humans and could be a relevant preclinical model to use in relation to research investigating treatment opportunities for DPN.