Background: Dysfunction of endothelial progenitor cells (EPCs) contributes to vascular disease in diabetes mellitus. However, the molecular mechanism underlying dysfunction of endothelial progenitor cells in diabetes mellitus remains unclear. Our study was aimed to illustrate the potential molecular mechanism underlying diabetic EPCs dysfunction in vivo and vitro. Furthermore, to assess the effect of EPCs transplantation on endothelium regeneration in diabetic rats. Methods: Functional assay in vitro and western blotting was conducted to reveal the association between C-X-C chemokine receptor type 7 (CXCR7) expression and diabetic EPCs dysfunction. To confirm the association between cellular CXCR7 level and EPCs function, the CXCR7 expression of EPCs was upregulated and downregulated via lentiviral transduction and RNA interference respectively. Western blotting was used to reveal the potential molecular mechanism underlying how Stromal-Derived Factor-1(SDF-1)/CXCR7 pathway regulate EPCs function. To elucidate the role of SDF-1/CXCR7 axis in EPCs mediated endothelium regeneration, carotid artery injury model was built in diabetic rats. Then, saline, diabetic, normal or CXCR7 primed EPCs were injected into tail vein after carotid artery injury model was built. Results: Diabetic EPCs dysfunction associated with decreasing CXCR7 expression. Furthermore, EPCs dysfunction can be mimicked by knockdown of CXCR7 in normal EPCs. However, upregulating CXCR7 expression can rescue diabetic EPCs dysfunction. SDF-1/CXCR7 axis positive regulate EPCs cellular function via activating AKT associated Kelch-like ECH-associated protein 1 (keap-1) / nuclear factor erythroid 2‑related factor 2 (Nrf2) axis, which can be reversed by blockage of AKT and Nrf2. CXCR7-EPC transplantation, better than diabetic or normal EPCs, significantly accelerate endothelial repairing and attenuate neointimal hyperplasia in diabetes mellitus. But, the therapeutic effect of CXCR7-EPC transplantation on endothelium regeneration can be reversed by knockdown of Nrf2 molecules. Conclusions: Diabetic EPCs dysfunction associated with decreasing CXCR7 expression. Furthermore, SDF-1/CXCR7 axis positive regulate EPCs cellular function via activating AKT/keap-1/Nrf2 axis. CXCR7 primed EPCs might be used for endothelial regeneration in diabetes associated vascular disease.