Neuropathic pain is a frequent condition caused by a lesion or disease of the central or peripheral somatosensory nervous system. A frequent cause of peripheral neuropathic pain is diabetic neuropathy. Its complex pathophysiology is not yet fully elucidated, which contributes to underassessment and undertreatment. A mechanism-based treatment of painful diabetic neuropathy is challenging but phenotype-based stratification might be a way to develop individualized therapeutic concepts. Our goal is to review current knowledge of the pathophysiology of peripheral neuropathic pain, particularly painful diabetic neuropathy. We discuss state-of-the-art clinical assessment, validity of diagnostic and screening tools, and recommendations for the management of diabetic neuropathic pain including approaches towards personalized pain management. We also propose a research agenda for translational research including patient stratification for clinical trials and improved preclinical models in relation to current knowledge of underlying mechanisms.