Patients suffering from both diabetes and PAD (peripheral arterial disease) are at risk of developing critical limb ischaemia and ulceration, and potentially requiring limb amputation. In addition, diabetes complicates surgical treatment of PAD and impairs arteriogenesis. Arteriogenesis is defined as the remodelling of pre-existing arterioles into conductance vessels to restore the perfusion distal to the occluded artery. Several strategies to promote arteriogenesis in the peripheral circulation have been devised, but the mechanisms through which diabetes impairs arteriogenesis are poorly understood. The present review provides an overview of the current literature on the deteriorating effects of diabetes on the key players in the arteriogenesis process. Diabetes affects arteriogenesis at a number of levels. First, it elevates vasomotor tone and attenuates sensing of shear stress and the response to vasodilatory stimuli, reducing the recruitment and dilatation of collateral arteries. Secondly, diabetes impairs the downstream signalling of monocytes, without decreasing monocyte attraction. In addition, EPC (endothelial progenitor cell) function is attenuated in diabetes. There is ample evidence that growth factor signalling is impaired in diabetic arteriogenesis. Although these defects could be restored in animal experiments, clinical results have been disappointing. Furthermore, the diabetes-induced impairment of eNOS (endothelial NO synthase) strongly affects outward remodelling, as NO signalling plays a key role in several remodelling processes. Finally, in the structural phase of arteriogenesis, diabetes impairs matrix turnover, smooth muscle cell proliferation and fibroblast migration. The review concludes with suggestions for new and more sophisticated therapeutic approaches for the diabetic population.