Purpose: The purpose of this study was to test the effect of 12-week Tai Chi exercise on glucose control, peripheral nerve modulation, and perceived health for Type 2 diabetic patients with neuropathy. Methods: A pretest posttest design with a nonequivalent control group, 44 diabetic patients with neuropathy were recruited from an outpatient clinic of a university hospital and assigned into Tai Chi or Control groups. The Tai Chi exercise was based on Tai Chi for Diabetes program developed by Lam (2006) and performed one hour for each session twice a week for 12 weeks. Outcome variables were HbA1c, Michigan Neuropathy Screening Instrument scores and perceived health. A total of 25 patients completed both measures of pretest and posttest. Results: The study participants were 67 years old in average, diagnosed by DM for more than 15 years. Those who participated in 12-week Tai Chi exercise (n=13) significantly improved in HbA1c (t=2.23, p=.035) and perceived health (t=-2.28, p=.032) than the control group (n=12). Conclusion: Tai Chi exercise may improve glucose control and health status in patients with Type II diabetes. Further study with larger sample size would be necessary to confirm the effect of Tai Chi on peripheral nerve modulation.