Diabetic somatic neuropathy is one of the most prevalent complications in type 1 diabetes mellitus (T1D). Many treatments were investigated to alleviate the pain associated with this condition. Capsaicin is a naturally occurring lipophilic alkaloid that proved to be an effective and safe treatment of chronic painful disorders. Despite the known therapeutic benefits of capsaicin, the conventional topical formulations have limited bioavailability. Therefore, the current study aims to develop capsaicin nanoemulgel to increase skin permeation and enhance its activity against neuropathic pain. Low-energy emulsification method was used to prepare nanoemulsions, using eucalyptus oil as the oily phase, Tween 80 as a surfactant, propylene glycol, ethanol and isopropyl alcohol as co-surfactants. Pseudo-ternary phase diagrams were constructed to investigate and optimize the formulation. Subsequently, the optimum formulation was formulated as a nanoemulgel and investigated for, skin permeation using Franz diffusion cell, and diabetic neuropathy (DN) management using alloxan-induced diabetic mice. The selected nanoemulsion containing 0.05% capsaicin is composed of 8 % oil, 24 % S (Tween 80: isopropyl alcohol 2:1 w/w) and 68 % water. It is characterized by nanosized globules (28.15 ± 0.24 nm) with a relatively low polydispersity index (0.27 ± 0.05). The nanoemulgel revealed 4-fold increase in capsaicin cumulative permeation when compared to the conventional gel, and an improvement in its antinociceptive properties was observed in the treated diabetic mice ( < 0.05). The selected capsaicin nanoemulgel would be a promising transdermal formulation that may alleviate diabetic neuropathy in T1D patients.