Diabetic neuropathy is an incapacitating complication in diabetic patients. The cellular and molecular mechanisms involved in this pathology are poorly understood. Previous studies have suggested that the loss of spinal GABAergic inhibition participate in painful diabetic neuropathy. However, the role of extrasynaptic α5 subunit-containing GABAA (α5GABAA) receptors in this process is not known. The purpose of this study was to investigate the role of α5GABAA receptors in diabetes-induced tactile allodynia, loss of rate dependent depression (RDD) of the Hoffmann reflex (HR) and modulation of primary afferent excitability. Intraperitoneal administration of streptozotocin (STZ) induced tactile allodynia. Intrathecal injection of α5GABAA receptor inverse agonist, L-655,708, produced tactile allodynia in naïve rats whereas it reduced allodynia in diabetic rats. In healthy rats, electrical stimulation of the tibial nerve at 5 Hz induced RDD of the HR, although intrathecal treatment with L-655,708 (15 nmol) abolished RDD of the HR. STZ induced the loss of RDD of the HR, while intrathecal L-655,708 (15 nmol) restored RDD of the HR. L-655,708 (15 nmol) increased tonic excitability of the primary afferents without affecting the phasic excitability produced by the primary afferent depolarization. α5GABAA receptors were immunolocalized in superficial laminae of the dorsal horn and L4-L6 DRG. STZ increased mean fluorescence intensity and percentage of neurons expressing α5GABAA receptors in dorsal horn and L4-L6 DRGs in ten-weeks diabetic rats. Our results suggest that spinal α5GABAA receptors modulate the HR, play an antinociceptive and pronociceptive role in healthy and diabetic rats, respectively and are tonically active in primary afferents.