Poor balance control and increased fall risk have been reported in people with diabetic peripheral neuropathy (DPN). Traditional body sway measures are unable to describe underlying postural control mechanism. In the current study, we used stabilogram diffusion analysis to examine the mechanism under which balance is altered in DPN patients under local-control (postural muscle control) and central-control (postural control using sensory cueing). DPN patients and healthy age-matched adults over 55 years performed two 15-second Romberg balance trials. Center of gravity sway was measured using a motion tracker system based on wearable inertial sensors, and used to derive body sway and local/central control balance parameters. Eighteen DPN patients (age = 65.4±7.6 years; BMI = 29.3±5.3 kg/m2) and 18 age-matched healthy controls (age = 69.8±2.9; BMI = 27.0±4.1 kg/m2) with no major mobility disorder were recruited. The rate of sway within local-control was significantly higher in the DPN group by 49% (healthy local-controlslope = 1.23±1.06×10-2 cm2/sec, P<0.01), which suggests a compromised local-control balance behavior in DPN patients. Unlike local-control, the rate of sway within central-control was 60% smaller in the DPN group (healthy central-controlslope-Log = 0.39±0.23, P<0.02), which suggests an adaptation mechanism to reduce the overall body sway in DPN patients. Interestingly, significant negative correlations were observed between central-control rate of sway with neuropathy severity (rPearson = 0.65-085, P<0.05) and the history of diabetes (rPearson = 0.58-071, P<0.05). Results suggest that in the lack of sensory feedback cueing, DPN participants were highly unstable compared to controls. However, as soon as they perceived the magnitude of sway using sensory feedback, they chose a high rigid postural control strategy, probably due to high concerns for fall, which may increase the energy cost during extended period of standing; the adaptation mechanism using sensory feedback depends on the level of neuropathy and the history of diabetes.