Introduction: Endothelial progenitor cells (EPCs) in murine bone marrow lineage-negative c-kit+Sca-1+ (BM-KSL) fraction are mobilized in circulation upon tissue injury to mediate a neovascularization process called vasculogenesis, which requires proper differentiative capacity of EPCs. Diabetics suffer defective vasculogenesis, a substantial mechanism for diabetic angiopathy in ischemic limb and heart. How it occurs, however, remains largely unknown. We recently demonstrated that type 1 (T1) and T2 diabetes (DM) induces a transcriptional coactivator PGC-1α in endothelial cells (ECs), and that EC PGC-1α mediates impaired cell migration and angiogenesis in DM. PGC-1α was also found to increase in EPCs cultivated from T2DM patients PB-MNCs. Building on these, we hypothesized roles for PGC-1α in EPC dysfunction. Methods and Results: We used Tie2-Cre-driven PGC-1α conditional null mice (KO), with or without T1DM induction by streptozocine. DM increased PGC-1α mRNA in WT BM-KSL cells whereas this induction was blocked in KO cells. DM decreased the differentiation capacity of WT BM-KSL cells and PB-MNCs, as determined by the formation of primitive (pEPC) and definitive (dEPC) colonies. PGC-1α ablation in KO rescued the defective EPCs differentiation in DM, most notably PB-MNCs formation of dEPC colonies, the known vasculogenic population. Consistent with this, endothelial marker gene expression (KDR, CD31, vWF), EPCs abundance, and EPCs vasculogenic functions of PB-MNCs was blunted by DM but rescued by PGC-1α ablation in KO. Importantly, T2DM induction by high-fat diet feeding also caused reduction in the EPCs abundance and EC gene expression of PB-MNCs, which was rescued by PGC-1α ablation in KO. Conclusions: Our data demonstrate critical new roles for PGC-1α in vasculogenesis. PGC-1α mediates the vasculogenic differentiation defect of circulating EPCs in T1 and T2 DM, in sharp contrast to the anti-migratory effect of EC PGC-1α in mediating diabetic angiostasis. Our data broadens the relevance of PGC-1α in the etiology of diabetic angiopathy, now with a potential to therapeutically restore EPCs vasculogenicity, and may provide an opportunity to improve the efficacy of autologous adoptive EPC therapy for limb and myocardial ischemia in DM.