This study examined possible subtle degradation in sensory functions, balance, and mobility in older adults with type 2 diabetes (T2D) prior to overt development of diabetic peripheral neuropathy (DPN). Twenty-five healthy controls (HC group, age = 74.6 ± 5.4) and 35 T2D elderly without DPN (T2D group, age = 70.6 ± 4.7) were recruited. Sensory assessment included vibrotactile sensitivity, bilateral caloric weakness, and visual contrast sensitivity. Self-report measures comprised of Activity-Specific Balance Confidence (ABC), Human Activity Profile–adjusted activity scores (HAP-AAS), falls, and mobility disability. Performance measures included modified Timed-Up and Go (mTUG), Clinical Test of Sensory Integration for Balance (mCTSIB), and Frailty and Injuries (FICSIT-4) balance test. T2D group demonstrated significantly worse bilateral caloric weakness, marginally higher threshold of vibrotactile sensitivity and lower visual contrast sensitivity, and as well as signifcantly lower HAP-AAS. A significantly higher proportion of the T2D group failed mCTSIB Condition 4 than in the HC group. Subtle changes in multiple sensory systems of older adults with T2D may reduce redundancy available for balance control while performing challenging activities much before DPN development.