Autologous transplantation of mobilized peripheral blood mononuclear cells (M-PBMNCs) is a novel approach to improve critical limb ischemia (CLI) in diabetes. However, endothelial progenitor cells (EPCs) from diabetes are dysfunctional and impaired in ischemia-induced neovascularization. This study aimed to confirm the compromised efficiency of diabetic M-PBMNCs in therapeutic neovascularization, and to determine the underlying mechanisms of this impairment. Diabetic M-PBMNCs from 17 diabetic patients or healthy controls, or phosphate-buffered saline (PBS) were injected into the ischemic limbs of streptozotocin-induced diabetic nude mice. The limb blood perfusion, ambulatory score, ischemia damage, capillary/fiber ratio, arteriole density, collateral vessel formation, and pericytes recruitment were evaluated between these three groups. Non-invasive real time image and histopathology were used to detect the in vivo role of transplanted M-PBMNCs. Proliferation and adhesion of EPCs were assayed. In vitro vascular network incorporation and matrigel plug assay were used to test the pro-neovascularization role of M-PBMNCs. Transplantation of diabetic M-PBMNCs also improved neovascularization, but to a lesser extent from that observed with non-diabetic ones. This was associated with the impairment of diabetic M-PBMNCs capacity to differentiate into EPCs, to incorporate into vessel-like tubules in vitro, to participate in vascular-like structure formation in a subcutaneous matrigel plug, and to stimulate the recruitment of pericytes/smooth muscle cells. In addition, there was impairment in vasculogenesis, which was related to the reduced adhesion ability of EPCs from diabetic M-PBMNCs. Diabetes reduced the capacity of M-PBMNCs to augment neovascularization in ischemia.