Cardiovascular complications have been major concerns in the treatment of diabetes, and up to 80% of all deaths in diabetic patients are linked to cardiovascular problems. Impaired angiogenesis is one of the most serious symptoms associated with diabetes, resulting in delayed wound healing and lower limb amputation. Endothelial progenitor cells (EPCs), a subpopulation of adult stem cells, are recruited from bone marrow to the injured vessel to promote endothelial regeneration and neovascularization, playing an important role in angiogenesis. Interestingly, several clinical studies have showed that the number of recruited EPCs is reduced and their function is decreased under diabetic conditions, implying that diabetic EPC dysfunction may contribute to defective angiogenesis and resultant cardiovascular complications in diabetes. To recover the functional abilities of diabetic EPCs and to address possible application of EPC cell therapy to diabetic patients, some studies provided explanations for diabetic EPC dysfunction including increased oxidative stress, involvement of the inflammatory response, alteration in the nitric oxide pathway and reduced signals for EPC recruitment. This review discusses clinical evidence of impairment of EPC functions under diabetic conditions and the suggested mechanisms for diabetic EPC dysfunction.