The efficacy of treatments for diabetes mellitus-induced erectile dysfunction (DMED) is quite poor, and stem cell therapy is emerging as a useful method. In this study, we used endothelial progenitor cells (EPCs) overexpressing human telomerase reverse transcriptase (hTERT) for the treatment of DMED. Rat EPCs were transfected with hTERT (EPCs-hTERT). EPCs-hTERT secreted more growth factors and demonstrated enhanced proliferation and resistance to oxidative stress. Twenty-four male DMED rats were subjected to four treatments: DMED (DMED group), EPCs (EPCs group), EPCs transduced with control lentivirus (EPC-control group) and EPCs-hTERT (EPCs-hTERT group). A group of healthy rats were used as the normal control group. The erectile function in the EPCs-hTERT group was markedly increased compared with the EPCs and EPCs-control groups. The EPCs-hTERT group exhibited more growth factors, smooth muscle content and retained stem cells in penile tissues. The degree of apoptosis and collagen/smooth muscle ratio in penile tissues of the EPCs-hTERT group was considerably reduced. Endothelial nitric oxide synthase (eNOS) expression increased significantly in the EPCs-hTERT group. Taken together, these data showed that the enhanced paracrine effect, resistance to oxidative stress and proliferation of EPCs-hTERT may contribute to the improvements of erectile function in DMED rats.