Increases in arginase activity have been reported in a variety of disease conditions characterized by vascular dysfunction. Arginase competes with NO synthase for their common substrate arginine, suggesting a cause and effect relationship. We tested this concept by experiments with streptozotocin diabetic rats and high glucose (HG)-treated bovine coronary endothelial cells (BCECs). Our studies showed that diabetes-induced impairment of vasorelaxation to acetylcholine was correlated with increases in reactive oxygen species and arginase activity and arginase I expression in aorta and liver. Treatment of diabetic rats with simvastatin (5 mg/kg per day, subcutaneously) or l-citrulline (50 mg/kg per day, orally) blunted these effects. Acute treatment of diabetic coronary arteries with arginase inhibitors also reversed the impaired vasodilation to acetylcholine. Treatment of BCECs with HG (25 mmol/L, 24 hours) also increased arginase activity. This effect was blocked by treatment with simvastatin (0.1 μmol/L), the Rho kinase inhibitor Y-27632 (10 μmol/L), or l-citrulline (1 mmol/L). Superoxide and active RhoA levels also were elevated in HG-treated BCECs. Furthermore, HG significantly diminished NO production in BCECs. Transfection of BCECs with arginase I small interfering RNA prevented the rise in arginase activity in HG-treated cells and normalized NO production, suggesting a role for arginase I in reduced NO production with HG. These results indicate that increased arginase activity in diabetes contributes to vascular endothelial dysfunction by decreasing l-arginine availability to NO synthase.