Persistent vascular injury and degeneration in diabetes are attributed in part to defective reparatory function of angiogenic cells. Our recent work implicates endoplasmic reticulum (ER) stress in high-glucose-induced bone marrow (BM) progenitor dysfunction. Herein, we investigated the in vivo role of ER stress in angiogenic abnormalities of streptozotocin-induced diabetic mice. Our data demonstrate that ER stress markers and inflammatory gene expression in BM mononuclear cells and hematopoietic progenitor cells increase dynamically with disease progression. Increased CHOP and cleaved caspase- 3 levels were observed in BM--derived early outgrowth cells (EOCs) after 3 months of diabetes. Inhibition of ER stress by ex vivo or in vivo chemical chaperone treatment significantly improved the generation and migration of diabetic EOCs while reducing apoptosis of these cells. Chemical chaperone treatment also increased the number of circulating angiogenic cells in peripheral blood, alleviated BM pathology, and enhanced retinal vascular repair following ischemia/reperfusion in diabetic mice. Mechanistically, knockdown of CHOP alleviated high-glucose-induced EOC dysfunction and mitigated apoptosis, suggesting a pivotal role of CHOP in mediating ER stress-associated angiogenic cell injury in diabetes. Together, our study suggests that targeting ER signaling may provide a promising and novel approach to enhancing angiogenic function in diabetes.