Diabetes mellitus, which is largely driven by nutritional and behavioral factors, is characterized by accelerated atherosclerosis with impaired plaque stability. Atherosclerosis and associated complications are the major cause of mortality in diabetic patients. Efficient therapeutic concepts for diabetes-associated atherosclerosis are lacking. Atherosclerosis among diabetic patients is associated with reduced endothelial thrombomodulin (TM) expression and impaired activated protein C (aPC) generation. Here, we demonstrate that atherosclerotic plaque stability is reduced in hyperglycemic mice expressing dysfunctional TM (TMPro/Pro mice), which have a pro-coagulant phenotype due to impaired thrombin inhibition and markedly reduced aPC generation. The vessel lumen and plaque size of atherosclerotic lesions in the truncus brachiocephalic were decreased in diabetic TMPro/Pro ApoE-/- mice compared to diabetic ApoE-/- mice. While lipid accumulation in lesions of diabetic TMPro/Pro ApoE-/- mice was lower than that in diabetic ApoE-/- mice, morphometric analyses revealed more prominent signs of instable plaques, such as a larger necrotic core area and decreased fibrous cap thickness in diabetic TMPro/Pro ApoE-/- mice. Congruently, more macrophages and fewer smooth muscle cells were observed within lesions of diabetic TMPro/Pro ApoE-/- mice. Thus, impaired TM function reduces plaque stability, a characteristic of hyperglycemia-associated plaques, thus suggesting the crucial role of impaired TM function in mediating diabetes-associated atherosclerosis.