Diabetes increases the risk of hemorrhagic transformation (HT) in ischemic stroke, especially with the use of tissue plasminogen activator (tPA). We showed that iron chelation therapy with deferoxamine (DFX) improves functional outcome in male diabetic animals after embolic stroke but its interaction with tPA remained unknown. We also reported that increased HT is associated with loss of cerebrovasculature in the recovery period in diabetic animals. This study tested the hypotheses that DFX treatment initiated after stroke 1) will improve neurological recovery after embolic stroke with tPA, and 2) will prevent cerebrovascular regression in diabetes. Control and type 2 diabetic animals were subjected to embolic middle cerebral artery occlusion. tPA (1 mg/kg) was given at 90 min post-occlusion. DFX (100 mg/kg) or vehicle was given every 12 h for 7 days after stroke. The composite score (Bederson’s score and beam walk), adhesive removal (ART) and novel object recognition (NOR) were assessed at day 3, 7 and 14 after the surgery. Cerebrovascularization indices in the ipsilateral cortex (vascular volume, surface area, and branch density) were measured with 3D imaging. DFX improved sensorimotor deficits in both groups and this effect was more robust in tPA combination. While DFX lowered vascularization indices in control animals, it prevented vasoregression in diabetes. Interestingly, DFX prevented the recovery of cognitive function in controls while improving it in diabetic animals. These results suggest that treatment with DFX may improve long term recovery in diabetes.