Uncoupling of the endothelial nitric oxide synthase (eNOS) resulting in superoxide anion (O₂⁻) formation instead of nitric oxide (NO) causes diabetic endothelial dysfunction. eNOS regulates mobilization and function of endothelial progenitor cells (EPCs), key regulators of vascular repair. We postulate a role of eNOS uncoupling for reduced number and function of EPC in diabetes. EPC levels in diabetic patients were significantly reduced compared with those of control subjects. EPCs from diabetic patients produced excessive O₂⁻ and showed impaired migratory capacity compared with nondiabetic control subjects. NOS inhibition with N^G-nitro-l-arginine attenuated O₂⁻ production and normalized functional capacity of EPCs from diabetic patients. Glucose-mediated EPC dysfunction was protein kinase C dependent, associated with reduced intracellular BH₄ (tetrahydrobiopterin) concentrations, and reversible after exogenous BH₄ treatment. Activation of NADPH oxidases played an additional but minor role in glucose-mediated EPC dysfunction. In rats with streptozotocin-induced diabetes, circulating EPCs were reduced to 39 ± 5% of controls and associated with uncoupled eNOS in bone marrow. Our results identify uncoupling of eNOS in diabetic bone marrow, glucose-treated EPCs, and EPCs from diabetic patients resulting in eNOS-mediated O₂⁻ production. Subsequent reduction of EPC levels and impairment of EPC function likely contributes to the pathogenesis of vascular disease in diabetes.