Peroxynitrite (ONOO(-)) contributes to coronary microvascular dysfunction in diabetes mellitus (DM). We hypothesized that in DM, ONOO(-) interferes with the function of coronary endothelial caveolae, which plays an important role in nitric oxide (NO)-dependent vasomotor regulation. Flow-mediated dilation (FMD) of coronary arterioles was investigated in DM (n = 41) and non-DM (n = 37) patients undergoing heart surgery. NO-mediated coronary FMD was significantly reduced in DM patients, which was restored by ONOO(-) scavenger, iron-(III)-tetrakis(N-methyl-4'pyridyl)porphyrin-pentachloride, or uric acid, whereas exogenous ONOO(-) reduced FMD in non-DM subjects. Immunoelectron microscopy demonstrated an increased 3-nitrotyrosine formation (ONOO(-)-specific protein nitration) in endothelial plasma membrane in DM, which colocalized with caveolin-1 (Cav-1), the key structural protein of caveolae. The membrane-localized Cav-1 was significantly reduced in DM and also in high glucose-exposed coronary endothelial cells. We also found that DM patients exhibited a decreased number of endothelial caveolae, whereas exogenous ONOO(-) reduced caveolae number. Correspondingly, pharmacological (methyl-β-cyclodextrin) or genetic disruption of caveolae (Cav-1 knockout mice) abolished coronary FMD, which was rescued by sepiapterin, the stable precursor of NO synthase (NOS) cofactor, tetrahydrobiopterin. Sepiapterin also restored coronary FMD in DM patients. Thus, we propose that ONOO(-) selectively targets and disrupts endothelial caveolae, which contributes to NOS uncoupling, and, hence, reduced NO-mediated coronary vasodilation in DM patients.