Objective: Ischemia due to narrowing of the femoral artery and distal vessels is a major cause of peripheral arterial disease and morbidity affecting patients with diabetes. Diabetes-induced premature senescence of endothelial cells (EC) has been proposed as a mechanism leading to impaired ischemia-driven angiogenesis. Importantly, our previous work has shown that hyperglycemia reduced vascular endothelial growth factor (VEGF) activity in ischemic muscle of diabetic mice, which was associated with increased expression of the protein tyrosine phosphatase Src homology region 2 domain-containing phosphatase-1 (SHP-1). Here, we evaluate the impact of SHP-1 deletion on EC function and senescence. Approach and Results: Ligation of the femoral artery was performed in nondiabetic (NDM) and 3 months diabetic (DM) mice with EC-specific deletion of SHP-1 and blood flow reperfusion was measured for 4 weeks. Blood flow reperfusion and limb function during voluntary wheel running were reduced by 43% and 82%, respectively in DM mice as compared to NDM mice. EC-specific deletion of SHP-1 in DM mice restored blood flow reperfusion by 60%, limb function by 86%, while capillary density was similar to NDM mice. Moreover, ablation of SHP-1 in EC prevented diabetes-induced expression of the senescence markers p53 and p21 and counteracted Nrf2 downregulation. In cultured EC, overexpression of dominant negative of SHP-1 prevented HG-induced inhibition of proliferation, migration, tubule formation and VEGFR2/Akt phosphorylation following VEGF stimulation. In addition, the expression of senescence markers and suppression of Nrf2 in EC exposed to HG levels were reversed by overexpression of dominant negative SHP-1. Conclusion: SHP-1 in ECs is a central effector of diabetes-induced senescence that blocks VEGF action, and induces aberrant collateral vessel formation and blood flow reperfusion. Reduced SHP-1 expression counteracts these pathologic features suggesting the notion that it represents a promising therapeutic target.