Objectives: Clinical and histological studies have found evidence that nerve ischemia is a major contributor to diabetic neuropathy (DN) in type 2 diabetes (T2D). The aim of this study was to investigate peripheral nerve microvascular permeability using dynamic contrast enhanced (DCE) magnetic resonance neurography (MRN) to analyze potential correlations with clinical, electrophysiological, and demographic data. Methods: Sixty-five patients (35/30 with/without DN) and 10 controls matched for age and body mass index (BMI) underwent DCE MRN of the distal sciatic nerve with an axial T1-weighted sequence. Microvascular permeability (K trans ), plasma volume fraction (v p ), and extravascular extracellular volume fraction (v e ) were determined with the extended Tofts model, and subsequently correlated with clinical data. Results: K trans and v e were lower in T2D patients with DN compared to patients without DN (0.037 min −1 AE 0.010 vs. 0.046 min −1 AE 0.014; p = 0.011, and 2.35% AE 3.87 vs. 5.11% AE 5.53; p = 0.003, respectively). In individuals with T2D, K trans correlated positively with tibial, peroneal, and sural NCVs (r = 0.42; 95%CI = 0.18 to 0.61, 0.50; 95%CI = 0.29 to 0.67, and 0.44; 95%CI = 0.19 to 0.63, respectively), with tibial and peroneal CMAPs (r = 0.27; 95%CI = 0.01 to 0.49 and r = 0.32; 95%CI = 0.07 to 0.53), and with the BMI (r = 0.47; 95%CI = 0.25 to 0.64). Negative correlations were found with the neuropathy deficit score (r = −0.40; 95%CI = −0.60 to −0.16) and age (r = −0.51; 95%CI = −0.67 to −0.31). No such correlations were found for v p . Conclusion: This study is the first to find associations of MR nerve perfusion parameters with clinical and electrophysiological parameters related to DN in T2D. The results indicate that a decrease in microvascular permeability but not plasma volume may result in nerve ischemia that subsequently causes demyelination.