Reduced muscle mass in the lower limbs of diabetic peripheral neuropathy (DPN) has been suggested to contribute to increased joint load, altered stability, and disability, but the mechanism underlying it has not been understood. It may be due to muscle fiber volume reduction (muscle atrophy), muscle fiber destruction (degeneration) or both. Degenerative lesions require the involvement of muscle stem cells (satellite cells) to regenerate muscle fibers and reshape muscle mass. Determining the degenerative stage and residual regenerative capacity of diabetic peripheral neuropathy muscles will affect the utility of therapeutic strategies targeting regeneration. In this study, living muscle tissue was obtained from 12 individuals with or without diabetic neuropathy undergoing underknee amputation surgery, and further histological, transcriptional expression profiling and satellite cells were isolated and cultured. Histological analysis showed progressive muscle degeneration and regeneration in patients with diabetic peripheral neuropathy. Transcriptional expression profiling supports these findings, suggesting significant upregulation of regeneration-related pathways. However, in the samples exhibiting the most severe pathological structure, only very small amounts of immature regenerative muscle fibers were found, and the growth was limited. Immunostaining of satellite cells indicated a significant reduction in the relative number of satellite cells only in the pathologically severe subgroup. Similarly, reduced fusion of satellite cells cultured in this group indicates impaired regenerative capacity in severe diabetic peripheral neuropathy.