Sensory neuropathy is a prominent component of diabetic neuropathy. It is not entirely clear how diabetes influences skin innervation, and whether these changes are correlated with clinical signs and laboratory findings. To investigate these issues, we performed skin biopsies on the distal leg of 38 consecutive type 2 diabetic patients with sensory symptoms in lower limbs (25 males and 13 females, aged 56.2 ± 9.4 years) and analysed the correlations of intraepidermal nerve fibre (IENF) densities in skin with glycaemic status (duration of diabetes, HbA1C, and fasting and post-prandial glucose levels), and functional parameters of small fibres (warm and cold thresholds) and large fibres (vibratory threshold and parameters of nerve conduction studies). Clinically, 23 patients (60.5%) had signs of small-fibre impairment, and 19 patients (50.0%) had signs of large-fibre impairment. IENF densities were much lower in diabetic patients than in age- and gender-matched controls (1.794 ± 2.120 versus 9.359 ± 3.466 fibres/mm, P < 0.0001), and 81.6% (31/38) of diabetic patients had reduced IENF densities. IENF densities were negatively associated with the duration of diabetes (standardized coefficient: –0.422, P=0.015) by analysis with a multivariate linear regression model. Abnormal results of functional examinations were present in 81.6% (warm threshold), 57.9% (cold threshold), 63.2% (vibratory threshold) and 49% (amplitude of sural sensory action potential) of diabetic patients. Among the three sensory thresholds, the warm threshold temperature had the highest correlation with IENF densities (standardized coefficient: –0.773, P < 0.0001). On nerve conduction studies in lower-limb nerves, there were abnormal responses in 54.1% of sural nerves, and 50.0% of peroneal nerves. Of neurophysiological parameters, the amplitude of the sural sensory action potential had the highest correlation with IENF density (standardized coefficient: 0.739, P < 0.0001). On clinical examination, 15 patients showed no sign of small-fibre impairment, but seven of these patients had reduced IENF densities. In conclusion, small-fibre sensory neuropathy presenting with reduced IENF densities and correlated elevation of warm thresholds is a major manifestation of type 2 diabetes. In addition, the extent of skin denervation increases with diabetic duration.