Abstract Background One of the main pathophysiological processes thought to be implicated in the development of diabetic cardiomyopathy is a microvascular disease (MiVD) that is prevalent in type 2 diabetes (T2D). However, the role of MiVD in the development of heart failure (HF) is not known. T2D screening programmes identify three types of MiVD – retinopathy, nephropathy and neuropathy. Both retinopathy and nephropathy have been independently associated with the development of incident HF in observational cohort studies. There is less data on peripheral neuropathy and HF outcomes. This study aimed to determine the independent association of diabetic neuropathy with incident HF events in a large longitudinal population cohort of T2D patients with a detailed clinical follow-up that includes available echocardiographic data. Design This was a population-based longitudinal cohort study from the Genetics of Diabetes Audit and Research in Tayside Scotland study (GoDARTS) from 1996 to 2016. A total of 9,598 patients with T2D were included with data available on hospital admissions, prescribing and other clinical variables including age, gender, smoking history, duration of T2D, body mass index, systolic blood pressure, glycosylated haemoglobin (HbA1c), triglyceride, total LDL and HDL cholesterol levels. Neuropathy cases were identified using a well-validated record linkage method utilising neuropathic drug prescription records to identify cases of neuropathic pain and to monofilament testing that is used to diagnose neuropathy. Results There were 805 HF events. After adjustment for clinical variables, the presence of painful neuropathy related to a 57% increased risk of incident HF (HR 1.57, 95% CI = 1.32–1.89, p<0.001). A similar risk was also observed with diabetic neuropathy identified by monofilament testing with a 52% (HR 1.52, CI = 1.013–1.225, P<0.05) increased risk of incident HF. Conclusions and relevance Peripheral neuropathy, a feature of MiVD, may be pathophysiologically associated with the development of HF in patients with T2D and may be a therapeutic target.