Objective This study evaluated the effect of human umbilical cord blood mononuclear cells (HUCB-MNCs) on bladder dysfunction in streptozotocin (STZ; 35 mg/kg, i.v.)-induced diabetic rats. Methods Adult male Sprague-Dawley rats (n = 30) were equally divided into three groups: control group, STZ-diabetic group, and HUCB-MNC-treated group (1 x 10(6) cells). HUCB-MNCs were isolated by density gradient centrifugation from eight healthy donors and injected into the corpus cavenosum in STZ-diabetic rats 4 weeks after the induction of diabetes. Studies were performed 4 weeks after HUCB-MNC or vehicle injection. In vitro organ bath studies were performed on bladder strips, whereas protein expression of hypoxia-inducible factor (HIF)-1 alpha, vascular endothelial growth factor (VEGF), and alpha-smooth muscle actin (SMA) in the bladder and the ratio of smooth muscle cells (SMCs) to collagen were determined using western blotting and Masson trichrome staining. Results Neurogenic contractions of detrusor smooth muscle strips were 55% smaller in the diabetic group than control group (P < 0.05); these contractions were normalized by HUCB-MNC treatment. In addition, HUCB-MNC treatment restored the impaired maximal carbachol-induced contractile response in detrusor strips in the diabetic group (29%; P < 0.05). HUCB-MNC treatment improved the KCl-induced contractile response in the diabetic bladder (68%; P < 0.05), but had no effect on ATP-induced contractile responses. Increased expression of HIF-1 alpha and VEGF protein and decreased expression of alpha-SMA protein and the SMC/collagen ratio in diabetic rats were reversed by HUCB-MNC. Conclusion Administration of HUCB-MNCs facilitates bladder function recovery, which is likely related to downregulation of HIF-1 alpha expression and attenuation of fibrosis in STZ-diabetic rats.