Objective To investigate the clinical effect of Bawei Qidan Capsule combined with epalrestat in the treatment of type 2 diabetic peripheral neuropathy, its influence on serum ferritin (SF) and oxidative stress indices, and possible mechanism of action. Methods A total of 62 patients with diabetic peripheral neuropathy (DPN) were enrolled and randomly divided into observation group and control group, with 31 patients in each group. The patients in the control group were given individualized hypoglycemic therapy and oral epalrestat, and those in the observation group were given Bawei Qidan Capsule in addition to the treatment in the control group; the course of treatment was 4 weeks for both groups. Traditional Chinese medicine (TCM) syndrome score and Toronto clinical scoring system (TCSS) were used to evaluate clinical outcome; a neuroelectric detective and diagnostic instrument was used to measure nerve conduction velocity; chemical colorimetry was used to measure SF, the thiobarbituric acid method was used to measure the level of malondialdehyde (MDA), and chemiluminescence was used to measure the level of superoxide dismutase (SOD). Results After treatment, both groups had significant reductions in TCM syndrome score and TCSS score (P<0.05), and the observation group had significantly greater reductions than the control group (P<0.05). After treatment, both groups had a significant increase in nerve conduction velocity (P<0.05), and the observation group had a significantly greater increase than the control group (P<0.05). After treatment, both groups had significant reductions in the levels of SF and MDA (P<0.05) and a significant increase in the level of SOD (P<0.05), and compared with the control group, the observation group had significantly greater reductions in SF and MDA and a significantly greater increase in SOD (P<0.05). Conclusion Bawei Qidan Capsule combined with epalrestat has a better clinical effect than epalrestat alone in the treatment of type 2 diabetic peripheral neuropathy and can effectively improve nerve conduction velocity, possibly by regulating iron metabolic pathways and improving oxidative stress response.