Cardiovascular complications are the leading cause of morbidity and mortality in diabetic patients. Endothelial dysfunction with impaired endothelial nitric oxide (NO) synthase (eNOS) activity is a widely accepted cause of diabetic vasculopathy. The mechanisms of endothelial dysfunction in diabetes remain elusive, thus limiting effective therapeutic interventions. We report novel evidence demonstrating that the calcium-dependent protease calpain causes endothelial dysfunction and vascular inflammation in the microcirculation of the ZDF (Zucker diabetic fatty) rat, a genetic rat model of type 2 diabetes. We found evidence of increased calpain activity and leukocyte trafficking in the microcirculation of ZDF rats. Inhibition of calpain activity significantly attenuated leukocyte-endothelium interactions in the vasculature of ZDF rats. Expression of cell adhesion molecules in the vascular endothelium of ZDF rats was consistently increased, and it was suppressed by calpain inhibition. In vivo measurement of endothelial NO availability demonstrated a 60% decrease in NO levels in the microcirculation of diabetic rats, which was also prevented by calpain inhibition. Immunoprecipitation studies revealed calpain-dependent loss of association between eNOS and the regulatory protein heat shock protein 90. Collectively, these data provide evidence for a novel mechanism of endothelial dysfunction and vascular inflammation in diabetes. Calpains may represent a new molecular target for the prevention and treatment of diabetic vascular complications.