Diabetic peripheral neuropathy is common and causes significant morbidity. Obstructive sleep apnea (OSA) is also common in patients with type 2 diabetes. Because OSA is associated with inflammation and oxidative stress, we hypothesized that OSA is associated with peripheral neuropathy in type 2 diabetes. To assess the relationship between OSA and peripheral neuropathy in patients with type 2 diabetes. A cross-sectional study of adults with type 2 diabetes recruited randomly from the diabetes clinic of two UK hospitals. Peripheral neuropathy was diagnosed using the Michigan Neuropathy Screening Instrument. OSA (apnea-hypopnea index ≥ 5 events/h) was assessed using home-based, multichannel respiratory monitoring. Serum nitrotyrosine was measured by ELISA, lipid peroxide by spectrophotometer, and microvascular function by laser speckle contrast imaging. Two hundred thirty-four patients (mean [SD] age, 57 [12] yr) were analyzed. OSA prevalence was 65% (median apnea-hypopnea index, 7.2; range, 0-93), 40% of which were moderate to severe. Neuropathy prevalence was higher in patients with OSA than those without (60% vs. 27%, P < 0.001). After adjustment for possible confounders, OSA remained independently associated with diabetic neuropathy (odds ratio, 2.82; 95% confidence interval, 1.44-5.52; P = 0.0034). Nitrotyrosine and lipid peroxide levels (n = 102, 74 with OSA) were higher in OSA and correlated with hypoxemia severity. Cutaneous microvascular function (n = 71, 47 with OSA) was impaired in OSA. We describe a novel independent association between diabetic peripheral neuropathy and OSA. We identified increased nitrosative/oxidative stress and impaired microvascular regulation as potential mechanisms. Prospective and interventional studies are needed to assess the impact of OSA and its treatment on peripheral neuropathy development and progression in patients with type 2 diabetes.