Neovasculogenesis induced by stem cell therapy is an innovative approach to improve critical limb ischemia (CLI) in diabetes. Mesenchymal stem cells (MSCs) are ideal candidates due to their angiogenic and immunomodulatory features. The aim of this study is to determine the therapeutic effects of human placenta-derived MSCs (P-MSCs) on diabetic CLI, with or without exogenous insulin administration, and the underlying mechanism of any effect. A series of in vitro experiments were performed to assess the stemness and vasculogenic activity of P-MSCs. P-MSCs were intramuscularly injected at two different doses with and without the administration of insulin. The efficacy of P-MSC transplantation was evaluated by ischemia damage score, ambulatory score, laser Doppler perfusion image (LDPI), capillary, and vascular density. In vivo imaging was applied to track the implanted P-MSCs. In vivo differentiation and in situ secretion of angiogenic cytokines were determined. In vitro experimental outcomes showed the differentiation potential and potent paracrine effect of P-MSCs. P-MSCs survived in vivo for at least 3 weeks and led to the acceleration of ischemia recovery, due to newly formed capillaries, increased arterioles, and secretion of various proangiogenic factors. P-MSCs participate in angiogenesis and vascularization directly through differentiation and cytokine expression.