Diabetic neuropathy is characterized by axonal degeneration, demyelination, and atrophy in association with failed axonal regeneration, remyelination, and synaptogenesis. Recent reports suggest that reduced levels of nerve growth factor (NGF) may play a significant role in the pathogenesis of diabetic polyneuropathy. In this study, we investigated the regulation of NGF by steroid diosgenin (DG) in a diabetic neuropathy rodent model. We found that DG, the primary spirostane-type steroid in several Dioscorea species, increased NGF levels in the sciatic nerve of diabetic rats. Additionally, DG increased neurite outgrowth in PC12 cells and enhanced nerve conduction velocities in the diabetic neuropathy mouse model. DG-treated diabetic mice showed reduced disarrangement of the myelin sheath and increased area of myelinated axons by electron microscope studies and exhibited improvement in the damaged axons. Our data further suggest that DG increased the nerve conduction velocity through induction of NGF. Thus, our findings indicate that DG, a major sapogenin obtained from Dioscorea nipponica, reverses functional and ultrastructural changes and induces neural regeneration in a diabetic neuropathy model.