In diabetic dyslipidemia, cholesterol accumulates in the plasma membrane, decreasing fluidity and thereby suppressing the ability of cells to transduce ligand-activated signaling pathways. Liver X receptors (LXRs) make up the main cellular mechanism by which intracellular cholesterol is regulated and play important roles in inflammation and disease pathogenesis. N, N-dimethyl-3β-hydroxy-cholenamide (DMHCA), a selective LXR agonist, specifically activates the cholesterol efflux arm of the LXR pathway without stimulating triglyceride synthesis. In this study, we use a multisystem approach to understand the effects and molecular mechanisms of DMHCA treatment in type 2 diabetic (db/db) mice and human circulating angiogenic cells (CACs), which are hematopoietic progenitor cells with vascular reparative capacity. We found that DMHCA is sufficient to correct retinal and BM dysfunction in diabetes, thereby restoring retinal structure, function, and cholesterol homeostasis; rejuvenating membrane fluidity in CACs; hampering systemic inflammation; and correcting BM pathology. Using single-cell RNA sequencing on lineage–sca1+c-Kit+ (LSK) hematopoietic stem cells (HSCs) from untreated and DMHCA-treated diabetic mice, we provide potentially novel insights into hematopoiesis and reveal DMHCA’s mechanism of action in correcting diabetic HSCs by reducing myeloidosis and increasing CACs and erythrocyte progenitors. Taken together, these findings demonstrate the beneficial effects of DMHCA treatment on diabetes-induced retinal and BM pathology.