Background Adhesive capsulitis (Frozen shoulder) is a disorder that remains poorly understood in terms of pathology and optimal treatment. Frozen shoulder is common among diabetic patients, with diabetes being a significant risk factor. This study evaluated the shoulder function (utilizing Oxford score and range of motion) and visual analogue scale (VAS) pain score after performing arthroscopic 360° capsular release and biceps tenotomy in diabetics versus nondiabetics with primary frozen shoulder. Patient and methods This prospective comparative analysis was conducted at Ain Shams University Hospitals between September 2022 and September 2023. Twenty patients with an established diagnosis of idiopathic frozen shoulder, with symptoms for a minimum of three months and failed conservative management were enrolled. All patients underwent arthroscopic 360° capsular release and biceps tenotomy with at least a 6-month follow-up period. Clinical, and functional data (Oxford Shoulder Score and range of motion), VAS pain score, and perioperative data were recorded and analyzed. Results The study population included 15 (75%) females and five (25%) males, they were divided into two age and sex-matched groups, 10 patients diagnosed with diabetes in group 1 and 10 nondiabetic patients in group 2, with a mean age of 53 years in group 1 and 48 years in group 2. Both groups demonstrated significant postoperative improvement in VAS pain score, Oxford shoulder score, and range of motion with a P value less than 0.001. When comparing the magnitude of benefit between the two groups, no statistically significant difference was detected (P value ˃ 0.05). Conclusion Arthroscopic 360° capsular release and biceps tenotomy effectively lower VAS pain score and improve shoulder function and range of motion in idiopathic frozen shoulder. Both nondiabetic patients and diabetic benefit equally from the procedure.