Several clinical trials have shown that prostaglandin E1 (PGE1) is effective in treating peripheral occlusive vascular disease, but not definitely for diabetic neuropathy. We developed a new preparation of PGE1 incorporated in lipid microspheres (lipo-PGE1) that was designed to accumulate at vascular lesions. The effect of lipo-PGE1 (10 micrograms/day) was compared with placebo and the normal dose of a free PGE1 preparation (PGE1-CD, 40 micrograms/day) in two studies (double-blind and well-controlled) which enrolled 364 diabetic patients with neuropathy and/or leg ulcers. The drugs were given intravenously (bolus or drip infusion) for 4 weeks. Clinical improvement was noted in 61.6% of the lipo-PGE1 group and 30.0% of the placebo group in Trial 1 (p < 0.01), while the figures were 58.3% in the lipo-PGE1 group and 37.1% in the PGE1-CD group in Trial 2 (p < 0.01). Leg ulcers became smaller in the lipo-PGE1 groups in both trials (p < 0.01). In Trial 2, motor conduction velocity improved in the lipo-PGE1 group (p = 0.016). Side effects occurred in few patients receiving lipo-PGE1 or placebo, but more patients developed local side effects in the PGE1-CD group (p < 0.01). Thus, bolus intravenous injection of lipo-PGE1 improved diabetic neuropathy and leg ulcers with minimal side effects.