The discovery of endothelial progenitor cells (EPCs) in human peripheral blood advanced the field of cell-based therapeutics for many pathological conditions. Despite the lack of agreement about the existence and characteristics of EPCs, autologous EPC populations represent a novel treatment option for complications requiring therapeutic revascularization and vascular repair. Patients with diabetic complications represent a population of patients that may benefit from cellular therapy yet their broadly dysfunctional cells may limit the feasibility of this approach. Diabetic EPCs have decreased migratory prowess and reduced proliferative capacity and an altered cytokine/growth factor secretory profile that can accelerate deleterious repair mechanisms rather than support proper vascular repair. Furthermore, the diabetic environment poses additional challenges for the autologous transplantation of cells. The present review is focused on correcting diabetic EPC dysfunction and the challenges involved in the application of cell-based therapies for treatment of diabetic vascular complications. In addition, ex vivo and in vivo functional manipulation(s) of EPCs to overcome these hurdles are discussed.