Abstract Background: Peripheral neuropathy is the most common chronic complication of both type 1 and type 2 diabetes, with an estimated lifetime prevalence exceeding 50%. Loss of cutaneous sensory information from the foot sole is reported to be a critical factor contributing to walking instability, poor balance and falls, in people with diabetic peripheral neuropathy (DPN). Although there is a very little evidence in the literature on the effectiveness of microcellular rubber insoles, they may offer a new rehabilitative approach, which promotes self-management by the user, to improve balance and walking, and reduce the risk of falling, in adults with diabetes and this study aims to find out the effectiveness of microcellular rubber insoles in peripheral neuropathy. Materials and Methods: This was a prospective observational study. A total of 30 patients with DPN, fulfilling the inclusion criteria, were selected for the study. All of the participants were clinically tested for the presence of neuropathy and evaluated by the force platform, after which they were advised to wear micro cellular rubber insole footwear (which was made in institutional set up as per patient’s foot size) for a period of 4 weeks. At the end of the stipulated period, the participants were again evaluated on the same parameters in the force platform. Results: After 4 weeks of intervention, there was a significant improvement in the postural stability as evidenced by a decrease in the mean of anterior–posterior sway (7.1225 ± 0.7102/5.7972 ± 0.6901) (P < 0.0001). Mean mediolateral sway also shows an improvement (4.9570 ± 0.5106/3.9639 ± 0.5749) (P < 0.0001). Similarly, improvements shown in mean sway area (368.4048 ± 58.9558/313.8788 ± 57.5957) (P = 0.0040) and sway velocity (23.2842 ± 2.1151/21.8840 ± 1.8419) (P < 0.0001). The step length, however, did not show any statistically significant improvement (0.6474 ± 0.0524/0.6333 ± 0.0597) (P = 0.2820). There was a significant reduction in the vertical component of the ground reaction force post-use of the insole (737.4333 ± 73.1577/659.3667 ± 82.7937) (P < 0.0001) with a reduction of 13% mean value. Conclusion: This study demonstrates that neuropathy deteriorates postural balance and gait; the present evidence provides insight indicating that footwear interventions do significantly alter static balance performance in the neuropathy population. Footwear interventions seem to have the capacity to alter underlying strategies controlling static and dynamic movement patterns through a combination of mechanical and sensorimotor mechanisms, for which in-depth investigation of neurophysiologic responses to footwear interventions is necessary to help confirm any sensorimotor adaptations.