Background: Metformin is the most commonly prescribed first-line therapy for Type 2 Diabetes Mellitus (T2DM), known for its effectiveness and safety. However, long-term use has been associated with Vitamin B12 deficiency, which may contribute to peripheral neuropathy, a common complication in diabetic individuals. Aim: To compare the prevalence of Vitamin B12 deficiency and peripheral neuropathy between metformin users and non-users in patients with T2DM and to evaluate the association between Vitamin B12 status and neuropathic symptoms. Material and Methods: This hospital-based cross-sectional observational study was conducted among 130 patients with T2DM aged 30–70 years. Participants were divided into two equal groups: metformin users (n=65) and non-users (n=65). Demographic data, clinical history, glycaemic status, and dietary patterns were recorded. Serum Vitamin B12 levels were assessed, and peripheral neuropathy was evaluated using clinical and neurological examination tools. A Vitamin B12 level <200 pg/mL was considered deficient. Data were analyzed using appropriate statistical tests with p<0.05 considered significant. Results: Vitamin B12 deficiency was observed in 40.00% of metformin users compared to 16.92% of non-users (p=0.003). Peripheral neuropathy was significantly more common among metformin users (47.69%) than non-users (27.69%) (p=0.02). A strong association was found between B12 deficiency and neuropathy, with 72.97% of B12-deficient individuals showing neuropathic symptoms (p<0.001). A significant increase in deficiency was also seen with longer metformin use (p=0.04). Conclusion: Metformin use in T2DM patients is associated with a significantly higher prevalence of Vitamin B12 deficiency and peripheral neuropathy. Longer duration of therapy further increases this risk. Regular screening and early intervention for B12 deficiency are recommended in metformin-treated patients to mitigate neurological complications.