Delayed reendothelialization contributes to restenosis after angioplasty and stenting in diabetes. Prior data have shown that bone marrow (BM)-derived endothelial progenitor cells (EPCs) contribute to endothelial recovery after arterial injury. We investigated the hypothesis that the EPC contribution to reendothelialization may be impaired in diabetes, resulting in delayed reendothelialization. Reendothelialization was significantly reduced in diabetic mice compared with nondiabetic mice in a wire-induced carotid denudation model. The EPC contribution to neoendothelium was significantly reduced in Tie2/LacZ BM-transplanted diabetic versus nondiabetic mice. BM from diabetic and nondiabetic mice was transplanted into nondiabetic mice, revealing that reendothelialization was impaired in the recipients of diabetic BM. To examine the relative roles of denuded artery versus EPCs in diabetes, we injected diabetic and nondiabetic EPCs intravenously after arterial injury in diabetic and nondiabetic mice. Diabetic EPCs recruitment to the neoendothelium was significantly reduced, regardless of the diabetic status of the recipient mice. In vitro, diabetic EPCs exhibited decreased migration and adhesion activities. Vascular endothelial growth factor and endothelial NO synthase expressions were also significantly reduced in diabetic EPCs. Notably, thrombospondin-1 mRNA expression was significantly upregulated in diabetic EPCs, associating with the decreased EPC adhesion activity in vitro and in vivo. Reendothelialization is impaired by malfunctioning EPCs in diabetes. Diabetic EPCs have phenotypic differences involving thrombospondin-1 expression compared with nondiabetic EPCs, revealing potential novel mechanistic insights and therapeutic targets to improve reendothelialization and reduce restenosis in diabetes.