The molecular and cellular level reaches of the metabolic dysregulations that characterize diabetes are yet to be fully discovered. As mechanisms underlying management of reactive oxygen species (ROS) gain interest as crucial factors in cell integrity, questions arise about the role of redox cues in the regulation and maintenance of bone marrow–derived multipotent stromal cells (BMSCs) that contribute to wound healing, particularly in diabetes. Through comparison of BMSCs from wild-type and diabetic mice, with a known redox and metabolic disorder, we found that the cytoprotective nuclear factor erythroid–related factor 2 (Nrf2)/kelch-like erythroid cell–derived protein 1 (Keap1) pathway is dysregulated and functionally insufficient in diabetic BMSCs (dBMSCs). Nrf2 is basally active, but in chronic ROS, we found irregular inhibition of Nrf2 by Keap1, altered metabolism, and limited BMSC multipotency. Forced upregulation of Nrf2-directed transcription, through knockdown of Keap1, restores redox homeostasis. Normalized Nrf2/Keap1 signaling restores multipotent cell properties in dBMSCs through Sox2 expression. These restored BMSCs can resume their role in regenerative tissue repair and promote healing of diabetic wounds. Knowledge of diabetes and hyperglycemia-induced deficits in BMSC regulation, and strategies to reverse them, offers translational promise. Our study establishes Nrf2/Keap1 as a cytoprotective pathway, as well as a metabolic rheostat, that affects cell maintenance and differentiation switches in BMSCs.