Impaired vascularity and nerve degeneration are the most important pathophysiological abnormalities of diabetic polyneuropathy (DPN). Therefore, regeneration of both the vascular and nervous systems is required for the treatment of DPN. The neural crest (NC) is a transient embryonic structure in vertebrates that differentiates into a vast range of cells, including peripheral neurons, Schwann cells, and vascular smooth muscle cells. In this study, we investigated the ability of transplantation of NC-like (NCL) cells derived from aged mouse induced pluripotent stem (iPS) cells in the treatment of DPN. iPS cells were induced to differentiate into neural cells by stromal cell-derived inducing activity (SDIA) and subsequently supplemented with bone morphogenetic protein 4 to promote differentiation of NC lineage. After the induction, p75 neurotrophin receptor-positive NCL cells were purified using magnetic-activated cell sorting. Sorted NCL cells differentiated to peripheral neurons, glial cells, and smooth muscle cells by additional SDIA. NCL cells were transplanted into hind limb skeletal muscles of 16-week streptozotocin-diabetic mice. Nerve conduction velocity, current perception threshold, intraepidermal nerve fiber density, sensitivity to thermal stimuli, sciatic nerve blood flow, plantar skin blood flow, and capillary number-to-muscle fiber ratio were evaluated. Four weeks after transplantation, the engrafted cells produced growth factors: nerve growth factor, neurotrophin 3, vascular endothelial growth factor, and basic fibroblast growth factor. It was also confirmed that some engrafted cells differentiated into vascular smooth muscle cells or Schwann cell-like cells at each intrinsic site. The transplantation improved the impaired nerve and vascular functions. These results suggest that transplantation of NCL cells derived from iPS cells could have therapeutic effects on DPN through paracrine actions of growth factors and differentiation into Schwann cell-like cells and vascular smooth muscle cells.