In the present study, we investigated a novel signaling target in diabetic cardiomyopathy where inflammation induces caspase-1-dependent cell death, pyroptosis, involving Nek7-GBP5 activators to activate the NLRP3 inflammasome, destabilizes cardiac structure and neovascularization. Furthermore, we explored the therapeutic ability of bone morphogenetic protein-7 (BMP-7) to attenuate these adverse effects. C57BL/6J mice (n = 16 mice/group) were divided into: control (200 mg/kg, 0.9% saline intraperitoneal injection, i.p.); Streptozotocin (STZ) and STZ-BMP-7 groups (STZ, 200 mg/kg, i.p. injection). After 6 weeks, heart function was examined with echocardiography, and mice were sacrificed. Immunostaining, Western blotting, H&E, and Masson’s trichrome staining was performed on heart tissues. STZ-induced diabetic cardiomyopathy significantly increased inflammasome formation (TLR4, NLRP3, Nek7, and GBP5), pyroptosis markers (caspase-1, IL-1β, and IL-18), inflammatory cytokines (IL-6 and TNF-α), MMP9, and infiltration of monocytes (CD14), macrophage (iNOS), and dendritic cells (CD11b and CD11c) (p < 0.05). Moreover, a significant endothelial progenitor cells (EPCs) dysfunction (c-Kit/FLk-1, CD31), adverse cardiac remodeling, and reduction in left ventricular (LV) heart function were observed in STZ versus control (p < 0.05). Treatment with BMP-7 significantly reduced inflammasome formation, pyroptosis, and inflammatory cytokines and infiltrated inflammatory cells. In addition, BMP-7 treatment enhanced EPC markers and neovascularization and subsequently improved cardiac remodeling in a diabetic heart. Moreover, a significant improvement in LV heart function was achieved after BMP-7 administration relative to diabetic mice (p < 0.05). In conclusion, BMP-7 attenuated inflammation-induced pyroptosis, adverse cardiac remodeling, and improved heart function via the TLR4-NLRP3 inflammasome complex activated by novel signaling Nek7/GBP5. Our BMP-7 pre-clinical studies of mice could have significant potential as a future therapy for diabetic patients.