The progression and pathophysiology of neuropathy in impaired glucose tolerance (IGT) and type 2 diabetes (T2DM) is poorly understood, especially in relation to autophagy. This study was designed to assess whether the presence of autophagy-related structures was associated with sural nerve fiber pathology, and to investigate if endoneurial capillary pathology could predict the development of T2DM and neuropathy. Sural nerve physiology and ultrastructural morphology were studied at baseline and 11 years later in subjects with normal glucose tolerance (NGT), IGT, and T2DM. Subjects with T2DM had significantly lower sural nerve amplitude compared to subjects with NGT and IGT at baseline. Myelinated and unmyelinated fiber, endoneurial capillary morphology, and the presence and distribution of autophagy structures were comparable between groups at baseline, except for a smaller myelinated axon diameter in subjects with T2DM and IGT compared to NGT. The baseline values of the subjects with NGT and IGT who converted to T2DM 11 years later demonstrated healthy smaller endoneurial capillary and higher g-ratio versus subjects who remained NGT. At follow-up, T2DM showed a reduction in nerve conduction, amplitude, myelinated fiber density, unmyelinated axon diameter, and autophagy structures in myelinated axons. Endothelial cell area and total diffusion barrier was increased versus baseline. We conclude that small healthy endoneurial capillary may presage the development of T2DM and neuropathy. Autophagy occurs in human sural nerves and can be affected by T2DM. Further studies are warranted to understand the role of autophagy in diabetic neuropathy.