Background: Diabetes mellitus is the most common cause of peripheral neuropathy, which itself is mediated in part via oxidative stress. Recent studies have used stem-cell-based therapies to regenerate nerve tissues following diabetic neuropathy. Folic acid supplementation promotes neuronal development and protection in some neurological diseases. Aim: This study aims to compare the effects of bone marrow-mononuclear cells (BM-MNCs) and folic acid (FA) in the treatment of peripheral neuropathy in streptozotocin-induced diabetic rats. Methods: Forty adult male albino rats were randomly divided into four groups: Group I (healthy control group); Group II, diabetic group (a single intraperitoneal streptozotocin injection); Group III, diabetic rats that received BM-MNCs; Group IV, diabetic rats that were treated with FA (10 mg/kg/day intraperitoneal injection) for 4 weeks. Random blood sugar was measured for all groups. The animals were euthanized, and the right sciatic nerve was carefully extracted to measure sciatic nerve conduction velocity and processed for histopathological, immunohistochemical (CD68), electron microscopic and morphometric studies. Results: The diabetic group showed progressive histological changes characteristic of neuropathy in the sciatic nerve. Also increased number of CD68-immunopositive cells were detected. In BM-MNC transplantation group, the sciatic nerve sections showed improved histological changes characteristic of neuropathy with a decreased number of CD68-immunopositive cells. The diabetic group treated with FA showed less histological results relative to diabetic rats treated with BM-MNCs. Conclusion: Diabetic rats treated with BM-MNC showed better improvement in diabetic neuropathy than diabetic rats treated with folic acid.