Diabetic peripheral neuropathy (DPN) is one of the most common complications of diabetes which primarily affects the sensory nervous system. Pain is the most common complaint that prompts patients to seek medical advice. With various presentations and intricate pathological mechanisms, diabetic peripheral neuropathic pain is currently the most crucial and challenging aspect of managing diabetic complications. As a heterogeneous disorder, there is no medication or treatment modality that is effective for all types of DPN and its associated neuropathic pain. Peripheral nerve decompression provides a new option for treating patients with diabetic peripheral neuropathic pain in the lower extremities. However, the clinical applicability of nerve decompression has been debated since it was first proposed. This review discusses the theoretical basis of nerve decompression, the clinical indications, and the progress of basic research based on the pathological mechanisms and nerve impairment patterns of diabetic peripheral neuropathic pain. The heterogeneity of DPN patients is summarized in terms of three aspects: complex pathophysiological mechanisms, multilevel nervous system involvement, and various nerve impairment properties. Identifying the presence of nerve entrapment among complex pathophysiological mechanisms is the key to successful outcomes. Tinel signs, focal pain, mechanical allodynia, and two-point discrimination were reported to be prognostic factors for good surgical outcomes, and their predictive ability might stem from their association with the early stage of entrapment neuropathy.