Purpose: To assess the efficacy of impairment-based manual physical therapy compared to sham conservative treatment for painful stiff shoulder in diabetic subjects. Relevance: Adhesive capsulitis or painful stiff shoulder is a common condition among diabetes mellitus (DM) subjects. Effects of manual therapy techniques have been widely studied in the literature but not as integrated impairment-based manual therapy techniques. Participants: Ninety patients of age (54.14 ± 12.85 years), both gender (41 male, 49 female) were selected on convenient sampling. Subjects were selected based on following: Physician diagnosed type-II DM of at-least two years duration; complaint of shoulder pain and stiffness (> 3 months duration); ability to understand and cooperate for instructions of tester. Methods: The subjects then were randomized to receive either of two interventions- sham intervention + standard care and experimental intervention + standard care. The sham control group received drugs for glycemic control, analgesics for shoulder pain, active mobilization exercises to shoulder girdle and shoulder joint. The experimental group received in addition, impairment-based manual therapy comprising of joint mobilization, neurodynamic mobilization, myofascial release and trigger point therapy. The treatment session was of one hour duration on five sessions (one session per week) for total study duration of five weeks. Patients were instructed to perform home programme once daily and were given patient log to ensure compliance. Data was collected twice- pre and post intervention by an independent blinded observer. Analysis: The two outcome measures (shoulder pain and disability index- SPADI, and pain intensity on visual analogue scale- VAS) were analyzed using students´ t-test at 95% confidence interval by SPSS 11.5 for Windows. Results: The experimental group showed statistically significant improvements post treatment in both the outcomes. The pre-post mean differences for SPADI (17.28 ± 3.18), and pain on VAS (3.29 ± 1.4) was significant (p<.05) in favor of experimental group. Conclusions: Impairment-based manual physical therapy in addition to standard physical therapy care was better than standard physical therapy care combined with sham intervention to relieve pain and disability in type-2 diabetes mellitus patients with painful stiff shoulders. Implications: Inclusion of impairment-based manual physical therapy should be considered based on clinical examination findings of articular, myofascial and neural tissue impairments through their contribution to shoulder pain and dysfunction in patients with type-2 diabetes mellitus. Further studies are warranted with large, population-based, multicenter, multinational trials on patients with idiopathic shoulder pain and dysfunction or in other clinical states following trauma, rupture, dislocation or surgery. Keywords: Shoulder Dysfunction; Rehabilitation; Physical Therapy.