Refractory wounds in diabetic patients present a significant clinical problem. Sonic hedgehog (SHH), a morphogenic protein central to wound repair, is deficient in diabetes. Regulation of SHH in wound healing is poorly understood. We hypothesize that thrombospondin-1 (TSP-1), through its receptor CD36, contributes to the SHH signaling defect in bone marrow-derived angiogenic cells (BMACs) in type 1 diabetic mice. Isolated BMACs from TSP-1 knockout mice demonstrated improved tube formation, migration, and adhesion, in parallel with active SHH signaling. BMACs from STZ-induced type 1 diabetic mice showed significantly impaired Matrigel tube formation (n=5, p<0.05 vs. control), which was rescued by TSP-1 depletion (n=5, p<0.05 STZ-TSP-1^-/- vs. STZ-WT) or exogenous SHH (20 mg/L, 24 hours, n=4, p<0.05 vs. STZ-control). The expression of CD36 was elevated in BMACs from STZ mice (n=4, p<0.05). SHH signaling was significantly higher in BMACs from TSP-1^-/- mice and TSP-1 receptor CD36 knockout mice (n=6, p<0.05 vs. WT), but not CD47 knockout mice (n=3, p>0.05 vs. WT). The impairment of recombinant human TSP-1 (rhTSP-1, 2.2nM, 24h) on BMAC Matrigel tube formation was significantly delayed by CD36 deletion (n=5, p<0.05). CD36^-/- BMACs demonstrated better tube formation under both normal and diabetic conditions, with active SHH signaling (n=4, p<0.05 vs. WT BMACs). In conclusion, The TSP-1/CD36 pathway contributes to the SHH signaling defect, resulting in BMAC dysfunction in type 1 diabetic mice.