Adipose tissue–derived stem cells (ASCs) are gaining increasing consideration in tissue repair therapeutic application. Recent evidence indicates that ASCs enhance skin repair in animal models of impaired wound healing. To assess the therapeutic activity of autologous vs. allogeneic ASCs in the treatment of diabetic ulcers, we functionally characterized diabetic ASCs and investigated their potential to promote wound healing with respect to nondiabetic ones. Adipose tissue–derived cells from streptozotocin-induced type 1 diabetic mice were analyzed either freshly isolated as stromal vascular fraction (SVF), or following a single passage of culture (ASCs). Diabetic ASCs showed decreased proliferative potential and migration. Expression of surface markers was altered in diabetic SVF and cultured ASCs, with a reduction in stem cell marker-positive cells. ASCs from diabetic mice released lower amounts of hepatocyte growth factor, vascular endothelial growth factor (VEGF)-A, and insulin-like growth factor-1, growth factors playing important roles in skin repair. Accordingly, the supernatant of diabetic ASCs manifested reduced capability to promote keratinocyte and fibroblast proliferation and migration. Therapeutic potential of diabetic SVF administered to wounds of diabetic mice was blunted as compared with cells isolated from nondiabetic mice. Our data indicate that diabetes alters ASC intrinsic properties and impairs their function, thus affecting therapeutic potential in the autologous treatment for diabetic ulcers.