Neuroimaging data demonstrate that carpal tunnel syndrome, a peripheral neuropathy, is accompanied by maladaptive central neuroplasticity. To further investigate this phenomenon, we collected magnetoencephalography data from 12 patients with carpal tunnel syndrome and 12 healthy control subjects undergoing somatosensory stimulation of the median nerve-innervated Digits 2 and 3, as well as Digit 5, which is innervated by the ulnar nerve. Nerve conduction velocity and psychophysical data were acquired to determine whether standard clinical measures correlated with brain response. In subjects with carpal tunnel syndrome, but not healthy controls, sensory nerve conduction velocity for Digits 2 and 3 was slower than Digit 5. However, somatosensory M20 latencies for Digits 2 and 3 were significantly longer than those of Digit 5. The extent of the M20 delay for median nerve-innervated Digit 2 was positively correlated with decreasing nerve conduction velocity and increasing pain severity. Thus, slower peripheral nerve conduction in carpal tunnel syndrome corresponds to greater delays in the first somatosensory cortical response. Furthermore, spectral analysis demonstrated weaker post-stimulus beta event-related desynchronization and earlier and shorter event-related synchronization in subjects with carpal tunnel syndrome. The extent of the decreased event-related desynchronization for median nerve-innervated digits was positively correlated with paraesthesia severity. We propose that ongoing paraesthesias in median nerve-innervated digits render their corresponding sensorimotor cortical areas 'busy', thus reducing their capacity to process external stimulation. Finally, subjects with carpal tunnel syndrome demonstrated a smaller cortical source separation for Digits 2 and 3 compared with healthy controls. This supports our hypothesis that ongoing paraesthesias promote blurring of median nerve-innervated digit representations through Hebbian plasticity mechanisms. In summary, this study reveals significant correlation between the clinical severity of carpal tunnel syndrome and the latency of the early M20, as well as the strength of long latency beta oscillations. These temporal magnetoencephalography measures are novel markers of neuroplasticity in carpal tunnel syndrome and could be used to study central changes that may occur following clinical intervention.