Background: The response of diabetic polyneuropathy (DPN) to conservative treatment is usually unsatisfactory. As the manifestations of DPN usually mimic nerve compression, we evaluated the outcomes of tibial nerve decompression at the tarsal tunnel compared to the conservative measures in patients presenting with painful lower limb diabetic neuropathy. Patients and methods: This randomized controlled clinical trial included 42 patients who were randomly assigned into two groups; Group 1 included 21 patients who were surgically managed by tibial nerve decompression at the tarsal tunnel level, and Group 2 included the remaining cases who received the standard conservative management. Follow-up was done after six months via clinical, nerve conduction, and ultrasound assessment. Results: All pre-intervention patient and disease criteria showed no significant difference between the study groups. Nevertheless, a significant improvement in neuropathic pain and ischemic manifestations was noticed in Group 1. The same group also expressed better improvement of nerve conduction studies at follow-up compared to its baseline values and Group 2. Posterior tibial artery indices and cross-sectional area of the posterior tibial nerve (PTN) were significantly improved in Group 1 compared to Group 2. Consequently, there was a great improvement in patient satisfaction with the surgical intervention. Conclusion: The surgical decompression of the PTN is associated with better short-term outcomes regarding pain improvement, nerve conduction findings, and ultrasonographic arterial and nerve parameters compared to the conservative treatment.