Atherosclerosis development is accelerated several-fold in patients with Type 2 diabetes. In the initial stages of disease, monocytes transmigrate into the subendothelial space and differentiate into foam cells. Scavenger receptors and ATP Binding Cassette (ABC) Transporters play an important role in foam cell formation as they regulate the influx and efflux of oxidized lipids. Here, we show that peritoneal macrophages isolated from Type 2 diabetic db/db mice have decreased expression of the ABC transporter ABCG1 and increased expression of the scavenger receptor CD36. We found a 2-fold increase in accumulation of esterified cholesterol in diabetic db/db macrophages compared to wild-type control macrophages. Diabetic db/db macrophages also had impaired cholesterol efflux to HDL, but not to lipid-free apoAI, suggesting that the increased esterified cholesterol in diabetic db/db macrophages was due to a selective loss of ABCG1-mediated efflux to HDL. Additionally, we were able to confirm downregulation of ABCG1 using C57BL/6J peritoneal macrophages cultured in elevated glucose in vitro (25mM glucose for 7d), suggesting that ABCG1 expression in diabetic macrophages is regulated by chronic exposure to elevated glucose. Diabetic KKay mice were also studied and were found to have decreased ABCG1 expression without an increase in CD36. These observations demonstrate that ABCG1 plays a major role in macrophage cholesterol efflux, and that decreased ABCG1 function can facilitate foam cell formation in Type 2 diabetic mice.