Dysfunction of mature endothelial cells is thought to play a major role in both micro- and macrovascular complications of diabetes. However, recent advances in biology of endothelial progenitor cells (EPCs) have highlighted their involvement in diabetes complications. To determine the effect of glucotoxicity on EPCs, human EPCs have been isolated from peripheral blood mononuclear cells of healthy donors and cultured in the presence or absence of high glucose (33 mmol/l) or high glucose plus benfotiamine to scavenge glucotoxicity. Morphological analysis revealed that high glucose significantly affected the number of endothelial cell colony forming units, uptake and binding of acLDL and Lectin-1, and the ability to differentiate into CD31- and vascular endothelial growth factor receptor 2–positive cells. Functional analysis outlined a reduced EPC involvement in de novo tube formation, when cocultured with mature endothelial cells (human umbilical vein endothelial cells) on matrigel. To explain the observed phenotypes, we have investigated the signal transduction pathways known to be involved in EPC growth and differentiation. Our results indicate that hyperglycemia impairs EPC differentiation and that the process can be restored by benfotiamine administration, via the modulation of Akt/FoxO1 activity.