Diabetes is increasing in the world and causes severe cardiovascular complications. Diabetes-induced limb ischemia leads to foot amputation and therapeutic remedies are urgently needed. Here we report that local injection of mesenchymal stem cells (MSCs) prestimulated with epidermal growth factor (EGF) restored blood flow and vasculogenesis in the ischemic hind-limb of type II diabetic (db(-)/db(-)) mice. Bone marrow cells from db(-)/db(-) mice are altered as evidenced by increased oxidative stress and reduced Akt and adhesion molecules when compared with control (db(-)/db(+)). Femoral artery ligation-induced ischemia was performed in the hind-limb of db(-)/db(-) and db(-)/db(+) mice for 28 days. Enhanced green fluorescent protein (EGFP)-MSCs stimulated+/-exogenous EGF for 24 h were injected locally into the ischemic muscle. Blood flow measured with MoorLDI-Laser and microangiography assessed with X-ray showed 100% recovery in db(-)/db(+) compared to 50% recovery in db(-)/db(-) mice. Interestingly, db(-)/db(-) mice had 60 and 96% blood flow recovery and 61 and 98% of vasculogenesis when treated with MSCs alone or MSCs modified with EGF, respectively. Western blot analysis of hind-limb muscles revealed an increase in Akt and vascular endothelial growth factor receptor phosphorylation and hypoxia-inducible factor) expression in db(-)/db(-) mice injected with MSCs or MSCs+EGF compared to db(-)/db(-) mice. Fluorescent microscopic images show that EGFP-MSCs differentiate into new microvessels. Adhesion and migration of MSCs on cultured endothelial cells were ICAM1-, VCAM1- and Akt-dependent mechanism and elevated when MSCs were prestimulated with EGF compared with nonstimulated MSCs. Our novel study data provide evidence that in type II diabetes, stimulated MSCs with EGF enhance the recovery of blood flow and angiogenesis.