Diabetic neuropathy is a common complication of diabetes mellitus, posing a challenge in treatment. Previous studies have indicated the protective role of mesenchymal stem cells against several disorders. Although they can repair nerve injury, their key limitation is that they reduce viability under stress conditions. We recently observed that overactivation of the carboxyl terminus of heat shock protein 70 (Hsp70) interacting protein (CHIP) considerably rescued cell viability under hyperglycemic stress and played an essential role in promoting the beneficial effects of Wharton's jelly-derived mesenchymal stem cells (WJMSCs). Thus, the present study was designed to unveil the protective effects of CHIP-overexpressing WJMSCs against neurodegeneration using in vivo animal model based study. In this study, western blotting observed that CHIP-overexpressing WJMSCs could rescue nerve damage observed in streptozotocin-induced diabetic rats by activating the AMPKα/AKT and PGC1α/SIRT1 signaling pathway. In contrast, these signaling pathways were downregulated upon silencing CHIP. Furthermore, CHIP-overexpressing WJMSCs inhibited inflammation induced in the brains of diabetic rats by suppressing the NF-κB, its downstream iNOS and cytokines signaling nexus and enhancing the antioxidant enzyme system. Moreover, TUNEL assay demonstrated that CHIP carrying WJMSCs suppressed the apoptotic cell death induced in STZ-induced diabetic group. Collectively, our findings suggests that CHIP-overexpressing WJMSCs might exerts beneficial effects, which may be considered as a therapeutic strategy against diabetic neuropathy complications.