The World Health Organization (WHO) predicts there will be 300 million people world-wide with diabetes mellitus by 2025. Currently it is estimated that there are 20 and 60 million people suffering from diabetes mellitus in North America and Europe, respectively. Within this huge population of diabetic persons approximately 50% will develop some form of sensory polyneuropathy, which involves the dying back of distal axons and a failure of axons to regenerate. This leads to incapacitating pain, sensory loss and poor wound healing. The end result is lower extremity amputation with approximately 90,000 diabetes-related amputations occurring each year in North America and the expectation of a 5-fold increase over the next 10 years due to increased incidence of type 2 diabetes. Abnormal neuronal Ca(2+) homeostasis and impaired mitochondrial function have been implicated in numerous CNS and PNS diseases including diabetic sensory neuropathy. The endoplasmic reticulum (ER), in part, regulates cellular Ca(2+) homeostasis and this process is linked to regulation of mitochondrial function and activity of anti-apoptotic signal transduction pathways. Here we review the current state of research regarding role of Ca(2+) dyshomeostasis and mitochondrial physiology in neuronal dysfunction in diabetes. The central impact of diabetes-induced alteration of Ca(2+) handling on sensory neurone function is discussed and related to abnormal ER performance. New results are presented showing suboptimal Ca(2+) concentration in the ER lumen in association with reduced SERCA2 expression in sensory neurones from type 1 diabetic rats. We hypothesize that deficits in neurotrophic factor support, specifically linked to diabetes-induced lowered expression of insulin and neurotrophin-3, triggers alterations of sensory neurone phenotype that are critical for the development of abnormal Ca(2+) homeostasis and associated mitochondrial dysfunction. The role of hyperglycaemia in diabetes is also discussed and we propose that high glucose concentration may impact at other sites to contribute to the heterogeneous aetiology of nerve damage in diabetes.