OBJECTIVE In this study we aimed to investigate the functional connectivity of brain regions involved in sensory processing in diabetes with and without painful and painless diabetic peripheral neuropathy (DPN) and the association with peripheral nerve function and pain intensity. RESEARCH DESIGN AND METHODS In this cross-sectional study we used resting-state functional MRI (fMRI) to investigate functional brain connectivity of 19 individuals with type 1 diabetes and painful DPN, 19 with type 1 diabetes and painless DPN, 18 with type 1 diabetes without DPN, and 20 healthy control subjects. Seed-based connectivity analyses were performed for thalamus, postcentral gyrus, and insula, and the connectivity z scores were correlated with peripheral nerve function measurements and pain scores. RESULTS Overall, compared with those with painful DPN and healthy control subjects, subjects with type 1 diabetes without DPN showed hyperconnectivity between thalamus and motor areas and between postcentral gyrus and motor areas (all P ≤ 0.029). Poorer peripheral nerve functions and higher pain scores were associated with lower connectivity of the thalamus and postcentral gyrus (all P ≤ 0.043). No connectivity differences were found in insula (all P ≥ 0.071). CONCLUSIONS Higher functional connectivity of thalamus and postcentral gyrus appeared only in diabetes without neuropathic complications. Thalamic/postcentral gyral connectivity measures demonstrated an association with peripheral nerve functions. Based on thalamic connectivity, it was possible to group the phenotypes of type 1 diabetes with painful/painless DPN and type 1 diabetes without DPN. The results of the current study support that fMRI can be used for phenotyping, and with validation, it may contribute to early detection and prevention of neuropathic complications.