OBJECTIVE: The twofold purpose of the study was to: 1) develop health state descriptions of diabetic peripheral neuropathy (DPN) and its complications for a new utility instrument, and 2) use these descriptions to assess patient preferences for health states associated with disease progression in DPN. METHODS: Development and pilot testing of seven standardized health state scenarios describing disease progression and complications in DPN has previously been presented. These seven states are mild neuropathy, painful neuropathy, severe neuropathy, mild ulcer, severe ulcer, minor amputation (toe) and major amputation (below the knee). Patients between the ages of 18 and 80 years were recruited from registries of diabetic patients at the University of Washington Medical Center and the Seattle VA. Patients with a history of DPN symptoms or complications were excluded. Each patient completed a computer interview using the U-Titer II utility measurement software. Both a rating scale (RS) and a standard gamble (SG) technique were used to quantify patient preferences for standardized descriptions of the seven health states. RESULTS: 52 patients completed the 60-minute exercise. Overall, the mean utilities for the seven health states were lower with the RS (0.86 to 0.27) when compared to the SG (0.87 to 0.61). The preference scores followed a logical, decreasing order, in accordance with severity, with the exception of the utility for minor amputation being higher than for severe ulcer. Neither previous knowledge of DPN nor demographic characteristics were significant predictors of utility. CONCLUSIONS: This study has reported on the development and evaluation of a new preference-based instrument for use in DPN.