Carpal tunnel syndrome is the most common entrapment neuropathy, affecting the median nerve at the wrist. Acupuncture is a minimally-invasive and conservative therapeutic option, and while rooted in a complex practice ritual, acupuncture overlaps significantly with many conventional peripherally-focused neuromodulatory therapies. However, the neurophysiological mechanisms by which acupuncture impacts accepted subjective/psychological and objective/physiological outcomes are not well understood. Eligible patients (n = 80, 65 female, age: 49.3 ± 8.6 years) were enrolled and randomized into three intervention arms: (i) verum electro-acupuncture 'local' to the more affected hand; (ii) verum electro-acupuncture at 'distal' body sites, near the ankle contralesional to the more affected hand; and (iii) local sham electro-acupuncture using non-penetrating placebo needles. Acupuncture therapy was provided for 16 sessions over 8 weeks. Boston Carpal Tunnel Syndrome Questionnaire assessed pain and paraesthesia symptoms at baseline, following therapy and at 3-month follow-up. Nerve conduction studies assessing median nerve sensory latency and brain imaging data were acquired at baseline and following therapy. Functional magnetic resonance imaging assessed somatotopy in the primary somatosensory cortex using vibrotactile stimulation over three digits (2, 3 and 5). While all three acupuncture interventions reduced symptom severity, verum (local and distal) acupuncture was superior to sham in producing improvements in neurophysiological outcomes, both local to the wrist (i.e. median sensory nerve conduction latency) and in the brain (i.e. digit 2/3 cortical separation distance). Moreover, greater improvement in second/third interdigit cortical separation distance following verum acupuncture predicted sustained improvements in symptom severity at 3-month follow-up. We further explored potential differential mechanisms of local versus distal acupuncture using diffusion tensor imaging of white matter microstructure adjacent to the primary somatosensory cortex. Compared to healthy adults (n = 34, 28 female, 49.7 ± 9.9 years old), patients with carpal tunnel syndrome demonstrated increased fractional anisotropy in several regions and, for these regions we found that improvement in median nerve latency was associated with reduction of fractional anisotropy near (i) contralesional hand area following verum, but not sham, acupuncture; (ii) ipsilesional hand area following local, but not distal or sham, acupuncture; and (iii) ipsilesional leg area following distal, but not local or sham, acupuncture. As these primary somatosensory cortex subregions are distinctly targeted by local versus distal acupuncture electrostimulation, acupuncture at local versus distal sites may improve median nerve function at the wrist by somatotopically distinct neuroplasticity in the primary somatosensory cortex following therapy. Our study further suggests that improvements in primary somatosensory cortex somatotopy can predict long-term clinical outcomes for carpal tunnel syndrome.