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BACKGROUND Cardiovascular complications are major clinical problems in type 2 diabetes mellitus (T2DM). The authors previously demonstrated a crucial role of red blood cells (RBCs) in control of cardiac function through arginase-dependent regulation of nitric oxide export from RBCs. There is alteration of RBC function, as well as an increase in arginase activity, in T2DM. OBJECTIVES The authors hypothesized that RBCs from patients with T2DM induce endothelial dysfunction by up-regulation of arginase. METHODS RBCs were isolated from patients with T2DM and age-matched healthy subjects and were incubated with rat aortas or human internal mammary arteries from nondiabetic patients for vascular reactivity and biochemical studies. RESULTS Arginase activity and arginase I protein expression were elevated in RBCs from patients with T2DM (T2DM RBCs) through an effect induced by reactive oxygen species (ROS). Co-incubation of arterial segments with T2DM RBCs, but not RBCs from age-matched healthy subjects, significantly impaired endothelial function but not smooth muscle cell function in both healthy rat aortas and human internal mammary arteries. Endothelial dysfunction induced by T2DM RBCs was prevented by inhibition of arginase and ROS both at the RBC and vascular levels. T2DM RBCs induced increased vascular arginase I expression and activity through an ROS-dependent mechanism. CONCLUSIONS This study demonstrates a novel mechanism behind endothelial dysfunction in T2DM that is induced by RBC arginase I and ROS. Targeting arginase I in RBCs may serve as a novel therapeutic tool for the treatment of endothelial dysfunction in T2DM.