Recently, we proclaimed that induced pluripotent stem (iPS) cells generated from H9c2 cells, following transplantation into infarcted nondiabetic mice, can inhibit apoptosis and differentiate into cardiac myocytes. iPS cells can be an ideal candidate to expand regenerative medicine to the clinic. Therefore, examining the wide range of their potential to differentiate into neovascular cell types remains a major interest. We hypothesized that transplanted iPS cells in the infarcted diabetic db/db and nondiabetic mice can differentiate into vascular smooth muscle (VSM) and endothelial cells (ECs) as well as activate endogenous c-kit progenitor cells to enhance neovascularization along with improved cardiac function. We transplanted intramyocardially 50,000 iPS cells in the peri-infarct zone of infarcted db/db and C57BL/6 mice and hearts were examined at D14 post-MI. Cardiac function was examined using echocardiography. Our data implies that there was a significant (p < 0.001) increase in VSM and ECs in the infarcted heart following iPS cell transplantation compared with MI and sham groups in both db/db and C57BL/6 animals. Furthermore, the MI+iPS cell transplanted group also displayed a significant (p < 0.001) increase in c-kit(+ve) activated VSM and ECs confirmed with combined stainings of c-kit and cell specific markers, compared with respective controls. Next, our histology data in the MI+iPS cell group also establishes a significant (p < 0.05) increase in coronary artery vessels compared with MI, suggesting neovascularization. Furthermore, our data demonstrates significant improved cardiac function following iPS cell transplantation compared with MI. Overall increased neovascularization in the infarcted db/db and C57BL/6 mice is associated with improved cardiac function following iPS cell transplantation.