Carpal Tunnel Syndrome (CTS) is a median nerve entrapment neuropathy that alters primary somatosensory cortex (S1) organization. While electro-acupuncture (EA), a form of peripheral neuromodulation, has been shown to improve clinical and neurophysiological CTS outcomes, the role of EA-evoked brain response during therapy (within and beyond S1) for improved outcomes is unknown. We investigated S1-associated whole brain fMRI connectivity during both a resting and sustained EA stimulation state in age-matched healthy controls ( N = 28) and CTS patients ( N = 64), at baseline and after 8 weeks of acupuncture therapy (local, distal, or sham EA). Compared to healthy controls, CTS patients at baseline showed decreased resting state functional connectivity between S1 and thalamic pulvinar nucleus. Increases in S1/pulvinar connectivity strength following verum EA therapy (combined local and distal) were correlated with improvements in median nerve velocity ( r = 0.38, p = 0.035). During sustained local EA, compared to healthy controls, CTS patients demonstrated increased functional connectivity between S1 and anterior hippocampus (aHipp). Following 8 weeks of local EA therapy, S1/aHipp connectivity significantly decreased and greater decrease was associated with improvement in patients' functional status ( r = 0.64, p = 0.01) and increased median nerve velocity ( r = −0.62, p = 0.013). Thus, connectivity between S1 and other brain areas is also disrupted in CTS patients and may be improved following EA therapy. Furthermore, stimulus-evoked fMRI connectivity adds therapy-specific, mechanistic insight to more common resting state connectivity approaches. Specifically, local EA modulates S1 connectivity to sensory and affective processing regions, linked to patient function and median nerve health.