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The process of arteriogenesis is severely compromised in patients with diabetes mellitus (DM). Earlier studies have reported the importance of <i>Egr-1</i> in promoting collateral outward remodeling. However, the role of <i>Egr-1</i> in the presence of DM in outward vessel remodeling was not studied. We hypothesized that <i>Egr-1</i> expression may be compromised in DM which may lead to impaired collateral vessel growth. Here, we investigated the relevance of the transcription factor <i>Egr-1</i> for the process of collateral artery growth in diabetic mice. Induction of arteriogenesis by femoral artery ligation resulted in an increased expression of Egr-1 on mRNA and protein level but was severely compromised in streptozotocin-induced diabetic mice. Diabetes mellitus mice showed a significantly reduced expression of <i>Egr-1</i> endothelial downstream genes Intercellular Adhesion Molecule-1 (<i>ICAM-1</i>) and urokinase Plasminogen Activator (<i>uPA</i>), relevant for extravasation of leukocytes which promote arteriogenesis. Fluorescent-activated cell sorting analyses confirmed reduced leukocyte recruitment. Diabetes mellitus mice showed a reduced expression of the proliferation marker Ki-67 in growing collaterals whose luminal diameters were also reduced. The Splicing Factor-1 (SF-1), which is critical for smooth muscle cell proliferation and phenotype switch, was found to be elevated in collaterals of DM mice. Treatment of DM mice with insulin normalized the expression of <i>Egr-1</i> and its downstream targets and restored leukocyte recruitment. SF-1 expression and the diameter of growing collaterals were normalized by insulin treatment as well. In summary, our results showed that Egr-1 signaling was impaired in DM mice; however, it can be rescued by insulin treatment.