Diabetic neuropathy is an incurable disease. We previously identified a mechanism by which aberrant bone marrow-derived cells (BMDCs) pathologically expressing proinsulin/TNF-α fuse with residential neurons to impair neuronal function. Here, we show that CD106-positive cells represent a significant fraction of short-term hematopoietic stem cells (ST-HSCs) that contribute to the development of diabetic neuropathy in mice. The important role for these cells is supported by the fact that transplantation of either whole HSCs or CD106-positive ST-HSCs from diabetic mice to non-diabetic mice produces diabetic neuronal dysfunction in the recipient mice via cell fusion. Furthermore, we show that transient episodic hyperglycemia produced by glucose injections leads to abnormal fusion of pathological ST-HSCs with residential neurons, reproducing neuropathy in nondiabetic mice. In conclusion, we have identified hyperglycemia-induced aberrant CD106-positive ST-HSCs underlie the development of diabetic neuropathy. Aberrant CD106-positive ST-HSCs constitute a novel therapeutic target for the treatment of diabetic neuropathy.