Independent of the severity of coronary artery disease, diabetic patients have an increased risk of developing heart failure. Diabetic cardiomyopathy (DCM) is characterized by microvascular pathologies and interstitial fibrosis. Mesenchymal stem cells (MSCs) are pluripotent and are able to differentiate into cardiomyocytes and vascular endothelial cells. Studies have demonstrated MSCs transplantation can prevent apoptosis of ischemic heart via upregulation of Akt and eNOS and inhibit myocardial fibrosis of dilated cardiomyopathy by decreasing the expression of matrix metalloproteinase (MMP) in rat models. In order to find out whether transplantation of MSCs is a promising treatment in DCM, we used streptozotocin (STZ) -induced diabetic rats as the model. Exogenous MSCs were injected into the femoral vein 8 weeks after STZ injection. Using independent experimental approaches, we showed that MSCs presented in the myocardium 4 weeks after transplantation and some of them were positive for the cardiac markers Troponin T and myosin heavy chain. MSCs transplantation significantly increased myocardial arteriolar density and decreased the collagen volume in diabetic myocardium resulting in improved cardiac function. Furthermore, MSCs transplantation increased MMP-2 activity and decreased transcriptional level of MMP-9. These results show that MSCs transplantation improved cardiac function in the rat DCM model, possibly through angiogenesis and attenuation of cardiac remodeling.